Market Commentary by Barry Cohen

Luxury property sales remain strong in the first quarter of 2022 despite a continued shortage of listings in the GTA

On the heels of a record-shattering 2021, luxury home sales in the Greater Toronto Area (GTA) continue to climb, surpassing last year’s first quarter numbers by double-digits in 2022. Year-to-date sales for both freehold and condominium properties over the $3 million price point are up over 25 per cent, with 704 homes changing hands in the first three months of 2022, up from 560 sales during the same period in 2021. Uber-luxe sales at the $5 and $7.5 million price point rose approximately 18 and 14 per cent respectively, while sales over $10 million fell just short of 2021 accelerated levels.

The pace of homebuying activity at the top end remained unrelenting in the first quarter. An influx of listings early in the year contributed to strong sales in January and February, but sales softened in March as supply virtually evaporated. The impact was evident across every price point in the GTA, with inventory exceptionally tight in Toronto proper. As of April 4th, there were 290 properties listed for sale between $2 and $3 million, 140 available between $3 and $4 million, and just 14 homes listed for sale between $8 and $10 million.

In years past, there was a larger selection of properties available at almost every price point in the luxury segment. During April and May, a greater number of buyers were competing for a fewer number of listings – which created bidding wars at price points not seen before. Almost 50 per cent of home sales over $3 million in the GTA were sold at or above list price in the first quarter of this year – with the lion’s share of bidding wars occurring in the $3 million to $3.75 million price range. One in four homes sold over $5 million moved in a multiple offer situation.

Affluent domestic buyers continued to represent the vast majority of buyers again in the first quarter of 2022. Despite the federal government achieving its target of 401,000 new permanent residents in 2021, they have yet to translate into an uptick in luxury sales. As the 2021 – 2023 immigration level plan ramps up and borders fully reopen, demand is expected to climb, especially in Toronto proper, a perennial favourite with newcomers.

From an economic perspective, the Canadian economy is expanding at a rapid pace, with recent job numbersbringing unemployment rates to 5.3 per cent, the lowest level since the 1970s. Many homebuyers accelerated

their purchase plans in advance of the interest rate hikes by the Bank of Canada (BOC) in March and April. This activity occurred despite the global uncertainties abound, including the Russian invasion of Ukraine, the rise of oil prices and other commodities, supply chain disruptions adding to inflation and the Bank of Canada promising further increases to the overnight rate.

Strong economic performance and immigration are expected to further bolster luxury sales in the GTA, with easing of restrictions put in place during the pandemic bringing some much-needed inventory into the market. March 21st essentially marked the beginning of the end of the pandemic in Ontario, adding further incentive for sellers, especially those who have been worried about listing their homes during Covid. Masks are no longer needed in grocery stores, retail establishments, restaurants, and gyms in Ontario. In recent weeks, offices in the downtown core have come alive, line-ups have been spotted in food courts in the PATH, and traffic, both foot and vehicular, has picked up. While employers are still figuring out hybrid work schedules, some executives may never return to the hustle and bustle of the core, preferring to work from home and come in only as required.

Although a sixth wave of COVID-19 looms large, Ontario is expected to weather the coming storm with a vaccinationrate of almost 90 per cent, and nearly half of Ontarians recipients of a booster shot. As we move from pandemic toendemic, society will learn to live with COVID-19 and variations of.

From the political stage, Doug Ford’s recent move to raise and expand the Foreign Buyer Tax to the entire province will be rendered futile, given that the federal government placed a ban on foreign buyers (with several exceptions) in the April 7th Budget. Over the past two years, the market has primarily been driven by domestic buyers, although that will change once the global borders are truly opened. New Canadians will not be affected by the announcement. The federal government also introduced a Home Buyer’s Bill of Rights that promises more transparency in the bidding process, if passed. This, in my opinion, will only serve to drive prices higher. Having an online visual or shared view of the bids will only validate demand for the home and likely run the auction to the end of exhaustion.

The Bank of Canada will continue to raise rates, from the current 1 per cent overnight rate to their target of 2.5 per centor more in 2023. Inventory is also a key factor moving forward. Increased supply of luxury properties will help meetdemand, give consumers choice, and should result in a more balanced market and keep price appreciation in check.

Life, post-pandemic, has changed. Health and home have never been more important. If the timing is right for you,the help of a luxury home specialist can prove to be invaluable. Please feel free to reach out if you are buying, selling,or require an updated market evaluation.

Stay healthy and safe,

Barry Cohen