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A study by Sotheby’s International Realty Canada found 25 per cent of luxury home sales in Toronto are to international buyers.Peter Power/The Globe and Mail

Roughly half the buyers of luxury homes in Montreal are foreign, Sotheby's International Realty Canada estimates, after having combed through its own sales data about top-tier dwellings.

"Montreal was a bit of a shocker," chief executive officer Ross McCredie said. "People don't think of Montreal as having a large proportion of international buyers."

Sotheby's decided to conduct a study of Canada's luxury home market after Mr. McCredie noticed that people were still defining luxury homes as those costing more than $1-million, which he thought was out of date.

Obtaining a "luxury" home today will generally cost at least $2-million in Toronto and Calgary, $2.8-million in Vancouver and $3.5-million in Montreal, although there can be variations by neighbourhood, according to the report to be released by Sotheby's on Thursday. For example, luxury homes in North Vancouver can be had for $2-million, while the entry-level price is about $4-million in west-side neighbourhoods such as Shaughnessey and Kitsilano.

Luxury starts at 3,500 square feet in Vancouver, Calgary and downtown Toronto, compared with 5,000 square feet in Montreal and 8,000 square feet in North Toronto, the report says. Mr. McCredie said the quality of the home, and the quality of its location, are bigger determining factors of "luxury" than size.

The one thing all luxury homes have in common is that they sit in the most sought-after locations in the country, in line with the old adage about real estate, the report says. "The unequivocal and top-ranked feature of a luxury property in every key market surveyed was deemed as being location," it says. That can include being close to downtown, near the best schools or having a fabulous view.

By and large, the market for such homes is dominated by Canadians; the degree to which foreign buyers are active varies from city to city. In Vancouver, the report suggests that international buyers account for about 40 per cent of luxury home purchases, compared with 15 per cent in Calgary, 25 per cent in Toronto, 49 per cent in Montreal and 25 per cent in recreational and ski markets such as Whistler, B.C., and Mont-Tremblant, Que.

"The international buyers in Montreal were very much there for lifestyle and because they loved the city, whereas Toronto, you did see a fairly significant number of wealthy investors who were buying high-end condos," Mr. McCredie said. "In Toronto, we had a couple of big transactions done, north of $10-million, to people who were under 35 years old. They are buyers who would have bought in the U.S., but decided on Canada as an investment."

The market for recreational properties was hit hard by the financial crisis and recession, but has now stabilized, Sotheby's said.

"We are seeing places like Whistler, which has been very much in a down market for the last six years, starting to pick up, and I think that's indicative of the Americans starting to buy again," Mr. McCredie said. "Americans have been in shock for the last four or five years, they've been holding on to their cash."

Not surprisingly, the buyers of luxury homes tend to be business owners or work in areas such as finance, investment banking, medicine or law. The majority of such buyers in Vancouver tend to earn between $200,000 and $500,000, while about 20 per cent earn more than $1-million a year, the report says. More than 80 per cent of luxury buyers in Calgary earn at least $500,000, while Toronto's luxury market has more buyers earning roughly $100,000.

Despite the price tags involved, these buyers are more likely to pay in cash. Extras such as wine cellars and theatres are popular.

Canadian home sales broadly have been in a slump since last summer, following mortgage insurance rule changes imposed by Finance Minister Jim Flaherty in an effort to halt the sharp increase in consumer debt levels and house prices. While the use of mortgage insurance is less common for luxury homes, one of the rule changes halted the use of mortgage insurance on homes worth more than $1-million.

Mr. McCredie said there has been a slowdown in luxury sales lately. "They're still buying, but they're taking a little bit longer."