A major real estate firm plans to reclassify what constitutes luxury, saying that the current standard – $1-million or above – no longer makes sense in markets like Toronto and Vancouver, where detached homes routinely sell for more.
Brad Henderson, president of Sotheby's International Realty Canada, said a revamped definition for elite status might be a detached house that sells for $1.8-million in Toronto and $4-million in Vancouver.
"In both Vancouver and Toronto, $1-million is not what it used to be," Mr. Henderson said in an interview. "As prices in both of those cities have risen over the last number of years, there are many more instances of $1-million-plus homes."
One of his ideas is to double the so-called benchmark number to determine a minimum price for the cream of the housing crop. The benchmark is a representation of the typical house in an area, excluding the most expensive transactions.
Mr. Henderson cautioned that there are wide variations in the value of high-end houses, depending on the neighbourhood. In Vancouver, detached homes sold last month for an average price of $3.48-million in the Kerrisdale neighbourhood, $3.49-million in Dunbar and $9.02-million in Shaughnessy. In Toronto, the average detached price was $2.61-million in Rosedale-Moore Park, $2.62-million in Forest Hill and $5.72-million for an area that covers the Bridle Path, Sunnybrook and York Mills.
"We've had the psyche that $1-million is a lot of money – and make no mistake, that it is – but this is not the $1-million home from 30 years ago," Mr. Henderson said. Adjusted for inflation, $1-million in 1986 is worth $2-million today.
Sotheby's, which targets high-end sales, will continue to report on transactions of at least $1-million. But the real estate brokerage is in the preliminary stages of setting a new statistical bar for houses to be categorized as bona fide members of the luxury club in Vancouver and Toronto.
In Greater Toronto, there were 11,112 properties that sold last year for at least $1-million, including 9,912 detached houses, according to a Sotheby's analysis. Sotheby's didn't provide statistics for Greater Vancouver, but it said that in the city of Vancouver, 4,578 properties sold last year for at least $1-million, including 3,454 detached homes. Data compiled by real estate boards show that Greater Vancouver's detached housing market is considerably more expensive than Greater Toronto's. Last month, the average price for detached houses sold was $1.78-million in Greater Vancouver, compared with $910,375 in Greater Toronto.
In the city of Toronto, there are still many options for buyers seeking detached homes for less than $1-million. About 34 per cent of detached properties that sold within Toronto's city limits last year fetched $1-million or higher, compared with a whopping 91 per cent in Vancouver, according to Royal LePage.
Industry observers say strong local economies, low mortgage rates, fewer listings and increased demand have helped fuel the housing boom in Canada's two largest markets. Some experts say buyers from China have had a large impact on sales of posh detached homes in Vancouver, creating a ripple effect that has also driven up prices for condos and townhouses.
Last year, the price for detached houses averaged $2.29-million (up 21 per cent from 2014) in Vancouver, compared with $1.04-million (up 12 per cent from 2014) in Toronto, data compiled by Royal LePage show.
The market within Vancouver's city limits has been on a tear in recent months, with the average detached price surpassing $2.87-million in January.
"You have a whole series of positive underlying factors that are driving both the Toronto and Vancouver markets," Mr. Henderson said. "You're also seeing in-migration from provinces such as Alberta, along with some additional investment from foreign buyers. The incidence of foreign investors is higher at the higher end of the market than it is on the balance of the market. When supply is more limited than demand, you're going to get upward pressure on prices."