Insatiable demand and meagre supply in the GTA’s luxury residential property market are sparking bidding wars and significant price escalation, according to a report released Wednesday by Sotheby’s International Realty Canada.
The number of residential properties sold over $4 million in the region soared by 30 per cent year over year in the first quarter of 2022.
Condominium sales in the $1 million-plus market also saw considerable gains in the first three months of this year. The number of condos sold over $1 million increased by 120 per cent in the GTA and 72 per cent in the city of Toronto compared to the same period last year, the report says.
Don Kottick, president and CEO of Sotheby’s International Realty Canada, says the luxury condominium market is booming due to a confluence of factors. “With the pandemic, we had the perfect storm: low interest rates at the time, the great generational wealth transfer, and millennials and the Gen Zers coming into the market,” I explained. “With the pandemic, we also saw a lot of people looking further afield. But now that it looks like the light is at the end of the tunnel, some people are coming back to the city, which is also pushing demand.”
Andy Taylor, senior vice-president of sales at Sotheby’s International Realty Canada, says there is a lack of inventory in the luxury condo market. “Inventory is very low in the city and no new inventory is on the horizon,” said Taylor, noting there are only 35 to 40 ultra-luxury condo units over 6,000 square feet on the market each year.
Taylor, a broker who focuses on the luxury condo market, is currently selling two, 5,845-square-foot condos at the Ritz-Carlton Residences, properties that he says are in the top 10 of the most expensive condos in the Toronto market. For $23.5 million, the residences include two private elevators, a wine cellar and three fireplaces.
“You’re buying the lifestyle; that’s really what luxury condos are all about,” said Taylor. “And the demand over the past few years has only increased with COVID and domestic buyers looking to move out of a house and into larger units.”
Compared to the booming luxury condo market, real estate sales over $1 million, including attached and single-family homes, experienced more moderate gains, up 11 per cent year over year in the first quarter of 2022. Only seven properties in the GTA sold for more than $10 million so far this year, compared to nine during the same period in 2021.
The new figures come after the luxury market witnessed record gains last year. Residential sales over $4 million skyrocketed by 224 per cent in the GTA in 2021, fueled in part by low interest rates and confidence in real estate as a hedge investment.
Kottick said the gains throughout the pandemic were unprecedented. “I don’t think we’ve ever experienced anything like this,” he said, noting that much of the demand and rapid price appreciation are due to a shortage of inventory. “This is definitely a historic time in terms of real estate.”
Rising interest rates will affect the market, Kottick said, but how those rate changes are introduced will determine the impact. “If it’s gradual, then the market kind of responds in a rational fashion,” he said. “If the interest rates are chopped up in bigger increments, then the market gets shocked.”
JOIN THE CONVERSATION
Anyone can read Conversations, but to contribute, you should be a registered Torstar account holder. If you do not yet have a Torstar account, you can create one now (it is free)