TORONTO, May 12, 2016 – Canada’s luxury residential real estate market has seen a notable increase in foreign buyer activity over the last ten years, according to a survey of real estate advisors released today in the Royal LePage Carriage Trade Luxury Properties Report.
When asked about activity over the last decade, 66 per cent of real estate advisors believe foreign buyer activity increased in their region since 2005. Almost a quarter (24 per cent) of advisors surveyed believe that 25 per cent or more of luxury properties in their area are purchased by foreign buyers. Over half of the advisors polled (51 per cent) cited China as the primary international region generating real estate purchases in Canada. Looking forward, 60 per cent of advisors anticipate increased foreign buyer activity in their region this year.
"While the impact of foreign buying on Canada’s overall residential real estate market is small, we see it growing in importance in the luxury market," said Phil Soper, president and chief executive officer, Royal LePage. "Canada’s stable political and financial systems, along with a tradition of cultural tolerance and openness to immigration and diversity, make our country an ideal destination for wealthy international purchasers looking to invest in real property. Recently, a lower Canadian dollar has made this proposition even more attractive."
The survey also explored trends in luxury real estate sales volumes. According to the report, 67 per cent of real estate advisors stated that luxury property sales activity has increased since January 2015. Current activity is in line with the long-term trend, as the survey also found that 80 per cent of advisors surveyed stated that activity in this category has increased since 2005.
"Despite economic volatility, Canada’s luxury real estate market is healthy and active," continued Soper. "In times of uncertainty, we can see potential home sellers sitting on the sidelines, and as a result available inventory is constrained. That is not the case in today’s luxury market."
The survey found that the majority (84 per cent) of advisors believe that luxury properties are used as primary residences, with almost all (97 per cent) characterizing buyers as couples, and a majority (66 per cent) maintaining that luxury buyers have children living at home. In line with use as a primary residence, 74 per cent cited "detached home" as the most desirable luxury property type. The most commonly cited feature that buyers look for was "popular neighbourhood" (53 per cent), followed by "size of house" (42 per cent).
"Downsizing" was the most common reason cited for sellers listing their luxury properties (selected as the number one reason by 66 per cent of advisors). In a related finding, survey respondents said the most common age range of sellers was 55 to 64 (53 per cent), while the most common age range of primary decision makers looking to purchase a luxury property was 45 to 54.
"Real estate ownership can satisfy both housing needs and investing goals," said Soper. "While market conditions and economic outlooks matter, we have found that luxury property ownership is predominantly driven by the desire to create a happy family home."
"In our country’s largest housing markets, conditions have made the jump to luxury easier," added Soper. "Average house prices in the standard category have appreciated at a faster rate than those in the luxury category, narrowing the gap and making higher-priced homes more accessible."
The Royal LePage Carriage Trade Luxury Properties Report also outlined regional trends, as Canada comprises a number of different markets, each with its own set of economic and demographic drivers.
Regional Market Summaries
In British Columbia, 83 per cent of real estate advisors surveyed believe that luxury property sales activity has increased since January 2015 and 76 per cent believe activity will continue to increase over the remainder of 2016. Seventy-nine per cent of advisors polled say foreign buying activity has increased since January 2015, with buyers from China dominating these purchases (95 per cent of advisors selected China as one of the top three countries from which buyers originate).
"We believe international interest is a significant factor driving price increases in the area, as foreign buyers view Vancouver as a ‘dream-city’, as it is so beautiful. When visiting the region, they instantly fall in love," said Jason Soprovich, real estate agent, Royal LePage Sussex. "The typical luxury property buyers in Vancouver are affluent, business-oriented and well-educated couples, and the region will always be one of the most sought-after in the world."
The housing market in Alberta is currently depressed, with low oil prices leading to increased unemployment and decreased consumer confidence. Of the real estate advisors surveyed in the province, 60 per cent believe luxury property sales activity has decreased since January 2015, and 64 per cent believe that it will continue to decrease over the remainder of the year. With that said, Calgary has seen a healthy increase in the average price of a luxury property over the past ten years, appreciating 61 per cent from 2005 to 2015.
"Unit sales in the luxury category have dropped slightly from last year’s level," said John Hripko, real estate agent, Royal LePage Benchmark. "Recently however, oil prices have inched higher, giving some agents and homeowners a renewed sense of optimism, causing inquiries for luxury properties in the $1 million to $2 million range to pick up. Demand for luxury properties above that price range has been slower, but consistent with the pace seen in 2015."
The luxury residential real estate market in Ontario is strong, with increases in prices driven in part by an extreme lack of inventory in the region. Real estate advisors have seen a long-term trend in sales activity, with 76 per cent of advisors saying that they have seen increased activity since January 2015, and 88 per cent saying that they have seen increased activity since 2005. Sixty-nine per cent of advisors surveyed said that there has been an increase in foreign buyer activity over the same 10-year period, and the top three most commonly cited factors motivating foreign buyers to buy in Ontario were: (1) a stable real estate market; (2) a stable financial system; and (3) a stable political system.
The look of luxury real estate has changed due to overall price appreciation," said Cailey Heaps Estrin, sales representative, Royal LePage Real Estate Services Ltd., Heaps Estrin Team. "Ten years ago, a $2 million house in the Toronto market sounded expensive but is now much more common. Toronto’s typical luxury property purchaser can be described as a successful local buyer looking to upsize and secure a new family home or an international buyer who wants to enter the Toronto market. In most cases, these residences are bought for the lifestyle they represent with the financial investment aspect being a secondary concern."
The luxury market in Quebec remains relatively healthy, with 39 per cent of real estate advisors surveyed saying that sales activity in this category increased since January of last year, and over half (54 per cent) feeling that it has increased over the last decade. When asked about foreign buyer activity in their area, 58 per cent of real estate advisors believe that less than 10 per cent of luxury real estate purchases in the province are made by foreign buyers.
"In comparison to the rest of the province, the luxury real estate segment in the Montreal region has been particularly healthy over the past ten years, with performance in 2015 having been especially strong. The Quebec economy, along with consumer confidence, is showing signs of noticeable improvement and is by extension fostering increased interest and activity in the Montreal real estate market," said Marie-Yvonne Paint, real estate professional Royal LePage Heritage. "Amongst these transactions, prestigious homes remain most popular with local buyers, with a small proportion of these purchases being attributable to foreign buyers. In the luxury apartment segment, the proportion of purchases made by foreign buyers is slightly higher."