Toronto and Vancouver, two of the country’s most expensive home markets, saw a sharp decline in luxury property sales in the first half of 2018, a phenomenon driven by government regulations, according to a recent report by Sotheby’s International Realty Canada.
Bloomberg reported that sales of homes beyond $1 million dipped in Toronto and in Vancouver by 46% and 19%, respectively, from a year earlier. While the number of homes sold above $4 million fell 51% in Toronto and 47% in Vancouver.
The declines came after both the federal and provincial governments implemented new regulations and taxes to control surging prices.
However, the trends for condominiums are different. In Vancouver, homebuyers who found prices of detached houses too much turned toward the high-rise alternative. Condo sales above $1 million grew 9% percent in the first half of the year from the same period in 2017, and 35% for condos above $4 million.
“There’s a belief that condos, in particular new condos, are going to continue to be a good investment notwithstanding some of the interim policy measures, and that the market will be able to absorb it and to move on,” Sotheby’s unit President and CEO Brad Henderson said in an interview with Bloomberg.
In Toronto, sales of condos above $1 million slumped 13% to 658 units. Sales of condos over $4 million, meanwhile plunged even more by 40%.
Henderson is expecting a rebound in the Toronto luxury market in the remaining six months of the year, when “the comparison won’t be as tough as it was to the hot first half of 2017.” The rebound may be longer in Vancouver, given that the market is still adjusting to new policy changes by the provincial government.
Montreal was the only major Canadian city to see overall growth in luxury sales from 2017’s first half, with homes above $1 million rising 24% to 460 sales, according to Sotheby’s report. The busy market was protected from “the sort of provincial and municipal policies used in Toronto and Vancouver to control prices.” Henderson believes it will be steady in the third quarter.
Two things that could prevent a rebound in Toronto and Vancouver: escalating trade tensions with the U.S. and interest rate increases by the Bank of Canada.
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