‘Now buyers and sellers can act rationally and both parties can negotiate’
When broker Paul Maranger looks at the current state of the Greater Toronto Area (GTA) real estate market, both the luxury and ultra-luxury brackets are performing the way they should be.
“Buyers actually can sleep over-night and think about a purchase, and then make a decision,” says the senior vice-president of sales at Paul & Christian Associates, a Sotheby’s International Realty Canada brokerage.
Since 2021, “there was this fervour which was considered natural, and it’s not. Now buyers and sellers can act rationally and both parties can negotiate.”
Ultra-luxury is categorized as properties over $10-million, according to Sotheby’s International Realty Canada’s Top-Tier Real Estate: Fall 2022 State of Luxury Report, while luxury properties are $1-million-plus.
Maranger’s Sotheby’s team, which includes agent Christian Vermast, works in both of these market categories, but the $10-million-plus category recently got a jolt when they listed a property in Toronto’s coveted Bridle Path neighbourhood for $28-million. Another Sotheby’s broker, Jane Zhang, is also involved. Toronto is not yet commonly known for these types of price tags on homes, but they are out there, Vermast says.
The home at 30 High Point Rd. is an architectural landmark designed by architect John C. Parkin. Parkin is credited for being one the leaders in developing mid-century modern style in Canada. Built in 1973, it is one of Canada’s largest single-family homes, with 26,000 square feet of interior space.
Located on a 2.12-acre lot, tucked far back from the street and surrounded by a canopy of trees, the eight-bedroom, 12-bathroom home has multiple terraces and balconies, and a circular driveway with outdoor parking for 15 cars and a valet-style, drive-through under-ground parking garage for seven cars. There’s elevator access to all three floors of the home, which has been ideally designed for owners who want to host large parties and gatherings.
“Most of the Bridle Path homes, when you drive by, have a huge gate and you can see the home, Zhang says. “This one you can’t. With the layered landscape, with your bare eyes you cannot see what is inside.”
It looks like a Muskoka property from the front, with a driveway that twists and undulates. That’s what clientele at this level want, Zhang says. They want to be able to celebrate their wealth and success, but they don’t want to show it off.
The exterior walls of the home are made of white and pink quartz with Medusa cement, which becomes brighter and stronger with age. The grand foyer features a white oak-ribbed, solid-wood front door with 24-inch by 24-inch transom windows, polished black granite tile flooring, teak detailed ceiling and recessed lighting. The mechanical room in the house is like one you would find in an office building, Maranger says.
“At the upper end of the luxury market, it always takes time to find the elusive buyer for homes of this magnitude and specification, because this is a very unique house,” he says.
Many “people are afraid of today’s interest rate environment, but people who can afford a home like this have been through [past] cycles, where interest rates were seven, 10 and 15 per cent. So, with interest rates in the five, six per cent range, it doesn’t faze them. We’re not dealing with first-time buyers in this price category. These buyers are more attuned to cyclicality in the market. They are out there, maybe not in droves, but they are definitely out there.”
According to the fall Sotheby’s report, Canada’s largest residential real estate market saw three properties sell over $10-million in the third quarter, compared with six that sold in the ultra-luxury bracket during the summer of 2021.
In the luxury bracket, real estate listings inventory declined in premier neighbourhoods in the GTA from July 1 to Aug. 31, with residential sales over $4-million (condos, attached and single-family homes) falling 42 per cent year-over-year from the previous summer’s heated market. Overall, residential sales over $1-million declined 39 per cent year-over-year in the summer months.
Early fall data also points to a tempered market: Luxury sales over $4-million in the GTA were down 63 per cent year-over-year from Sept. 1 to Sept. 30, while overall residential sales over $1-million saw an annual decline of 52 per cent.
Michael Kalles, president of Harvey Kalles Real Estate Ltd., says a lot of what’s going on in the market depends on how you define “luxury”. If $2-million is the market threshold, then there’s been a drop of activity. If, instead of $2-million, one looks at homes listed $3-million or more, the average sales price, median sales price and sale-to-list price ratio have held fairly steady throughout the year. The bulk of MLS sales activity now occurs between $600,000 and $1.5-million, he adds.
A dearth of listings is the big story, with buyers and sellers retreating to watch-and-wait positions as multiple interest rate hikes, high inflation, volatility in the financial markets and geopolitical headwinds affect the market. Housing inventory was 2.69 months through the end of September, which is not an abundant supply to go alongside the decline in sales volume, Kalles says.
“Canada’s luxury real estate market is undergoing a long-awaited rebalancing after two record-setting years, particularly in the regions that saw the most acceleration over the pandemic, including the GTA,” says Don Kottick, president and chief executive officer, Sotheby’s International Realty Canada. “As the market begins to enter a more balanced state, luxury purchasers are in less of a hurry to buy and sell quickly. Instead, they are taking their time to be extra selective with their purchasing decisions. Although the luxury market is significantly less impacted by the rising interest rates and economic headwinds than the conventional market, this market is still observing and reacting to general economic changes, as anyone would.”
Kalles says it’s true that affluent buyers are less impacted by rising lending rates, “but that’s ultimately a function of their liquidity. If their assets are in stocks, they may be feeling less confident in their position given recent volatility in equity markets. With interest rates on the rise they may be exploring other investment opportunities available to them, just as any household would. I can’t speak to an individual’s motivation, but everyone is affected in some fashion by economic conditions.”
Stalemates at the negotiating table are now being seen as buyers and sellers show patience, Kalles says.
“A home comes to market, a buyer submits an offer below list, the seller signs back in the middle and the buyer walks,” he says. “One-and-done offers, with no interest in a negotiation. So, as a result, sellers are choosing to wait unless they must sell.”
Vermast says the market is taking a breath. People need to see stability, to have confidence to move forward again. And if you’re looking to monitor the behaviour of the luxury market, look to Toronto’s “tried-and-true” neighbourhoods, such as Rosedale, Forest Hill, Bridle Path and The Annex, Kalles says.
Still, considerable positivity reigns. Kottick says Canada’s luxury market is poised for a strong winter and 2023, marked by high demand in Canada’s largest metropolitan cores. The GTA is rife with opportunities for luxury buyers and, compared with other markets in Canada, it offers a level of luxury we don’t typically see.
Luxury buyers in the GTA will always seek out quality and location, says Frank Mazzotta, president of Armour Heights Developments. The company’s 89 Avenue Yorkville bespoke luxury condo project is beginning construction now.
“We are proceeding according to the schedule we have established for this type of luxury product,” he says. “With only 28 suites total, the demand for boutique mid-rise buildings is sought after for individuals looking to rightsize. [89 Avenue is] private, quiet with no retail or commercial components.”
Quality and location also define Forma, the uber-luxury, two-tower condo project designed by renowned architect Frank Gehry that is planned for Toronto’s Entertainment District near the Princess of Wales Theatre.
“When we launched Forma, we knew it was important to offer residents an unprecedented living experience, through everything from the striking architecture to tastefully designed amenities,” says Mitchell Cohen, chief operating officer of Westdale Properties, on behalf of Great Gulf, Westdale Properties and Dream Unlimited.
“That’s why we brought together two world-class design teams – Frank Gehry and Paolo Ferrari – to help us redefine luxury living in our city. In a market where luxury housing is becoming limited, and buyers are becoming more selective, there is more demand for projects that have the best in design and living experiences.”
Maranger says demand can only be repressed for so long.
“If people have decided to put a decision on the back burner for now, that’s not lost demand, it is simply delayed,” he says. “Our expectation is 2024 is going to be extremely busy. We will be back to multiple offers. It’s going to be a very competitive market for buyers again in 2024.”
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