The outlook for residential real estate has been steadily improving. Last month, the Canadian Real Estate Association revised its price and transaction forecasts upwards for the year 2020 in the wake of strengthening job creation, government support for first-time homebuyers and an increasingly positive outlook for interest rates.
What this means for higher-priced properties is less clear.
“Luxury homes are in a category all by themselves,” says Christopher Alexander, executive-vice president and regional director for Ontario-Atlantic Region at RE/MAX Integra. “High-end buyers are savvier and more experienced. Building a fortune takes time, so many are older and have participated in several transactions. This isn’t their first rodeo.”
While the luxury end is driven by many of the same factors as the overall market, trading is thin. That means few experts have the detailed knowledge needed to provide useful insights. Alexander is one of the few.
RE/MAX Integra handled 22 of 70 properties that sold for more than $5-million during the past few years. This gives Alexander and his team strong insights into underlying trends, including what he says is the continued importance of location as a key demand driver.
Toronto sets the pace
According to Barbara Lawlor, chief executive officer and president of Baker Real Estate Incorporated, luxury low-rise residences in the Greater Toronto Area continue to be concentrated in Yorkville, Forest Hill, Lawrence Park and The Bridle Path.
These areas are also seeing the rise of boutique, luxury condominiums to satisfy empty nesters who want to right-size their lifestyles while staying in the neighbourhoods they know and love.
Lawlor cites Davpart Inc.’s The United Building on the corner of University Avenue and Dundas Street, for which she is head of sales and marketing, as an example due to the opportunity it gives homeowners to live on a prestigious thoroughfare in an ultraluxurious environment.
“For discerning buyers, the amenities, features and finishes found in Toronto properties are second to none,” Lawlor says. “In fact, the amenities in new luxury condos provide resort-style living all year long – like having a cottage in the city. The market is extremely competitive, so quality and innovation keep rising.”
This translates into huge pressure to keep up with the latest trends.
“Toronto developers are also leading the way in technology,” Lawlor says. “People today are wired to their handheld devices, and developers are responding by offering a multitude of options that can be loaded onto these machines. Home automation, for example, is reaching new levels of sophistication.”
Nowadays, a condominium that sells for $5-million may well be worth $8-million in a few years.The opportunity to earn money on a major scale is amazing.— Barbara Lawlor, President and CEO Baker Real Estate Incorporated
Strong historical performance
Luxury buyers could continue to do well in terms of maintaining their buying power, Lawlor says, as strong growth in both Toronto and Ontario should bring new entrants into the market.
“Real estate has historically been a wise investment,” notes the business development expert who trained as a real estate agent. “Nowadays, a condominium that sells for $5-million may well be worth $8-million in a few years. The opportunity to earn money on a major scale is amazing.”
One key factor that has caused anxiety in the Toronto real estate community is the gradual market adjustment to the effects of the new foreign buyers’ tax. The levy hit hard in such areas as Oakville, which hosts numerous, high net-worth families and which has become one of the wealthiest communities in the country.
“Chinese buyers are attracted to neighbourhoods with good schools and Oakville has some of the best in the country,” Alexander says.
“The area now appears to be bouncing back and is showing signs of positive price appreciation.”
Communities such as Glen Abbey Encore, which is located near public schools and amenities such as shopping, entertainment and key Oakville public transit infrastructure should do particularly well.
In condos, new builds are key
While location continues to dominate demand fundamentals, homes in choice areas tend to be older. That does not always mean better, Lawlor says.
For example, many existing properties come with lower ceiling heights and are badly in need of updating or repair. Tearing out existing structures and renovating is a time-consuming, costly and inconvenient option.
“Luxury purchasers have the means to personalize their condominiums to satisfy their dreams,” Lawlor says.
“Buying new is the answer. When they move in, they enjoy brand-spanking new everything, including top-notch appliances, high ceilings and wonderful flooring. They have selected appointments that make their suites feel like home from the moment they step in.”
Over the long term, the key driver of luxury demand could be economics, and more specifically interest rates.
During recent months, central banks have started easing monetary policy. Many monetary authorities are talking about driving rates below zero, as is the case in much of Europe and Japan. If it comes down to a choice between paying the banks for the privilege of storing their money there or buying a nicer home, Canadians – including many luxury buyers – will look hard at the latter option.
This content was produced by The Globe and Mail’s Globe Content Studio, in consultation with an advertiser. The Globe’s editorial department was not involved in its creation.