Third-quarter sales of luxury homes priced over $2 million in the Greater Toronto Area (GTA) nearly doubled when they increased 92 per cent year-over-year in Q3 2016. According to realtor Barry Cohen, 759 luxury homes were sold between July 1 and September 30, up from 394 sales during the same period one year ago.
This comes as a 15 per cent property transfer tax on foreign entities was implemented in the Greater Vancouver Regional District effective August 2, 2016. “Foreign investors were transitioning into the GTA within weeks of the tax introduction in Vancouver,” said Cohen, in a press release. “The impact on the market has been significant.”
Year-to-date, there have been 2,356 luxury property sales over $2 million in the GTA, an increase of 80 per cent compared to the 1,312 units sold in 2015. This segment represents about 2.6 per cent of the overall marketplace and continues to demonstrate how in-demand luxury properties are. Homes priced over $5 million have also been experiencing heated activity this year, with sales up 41 per cent compared to last year (79 in 2016, compared to 56 in 2015).
Inventory levels may pose a challenge for affluent home buyers in the GTA, especially in the $2 to $3 million price point. There are currently less than 200 luxury properties listed for sale in Toronto, resulting in fierce competition for high-end homes, especially along the Yonge St. corridor. Multiple offers remain commonplace, causing prices to escalate.
Over the $5 million level, however, there is more supply available. Although sales are still strong at this level, there are some consumers that worry a market correction will occur in late 2017 or early 2018.
“Government intervention is already underway at a federal level to soften the potential impact,” added Cohen. “Last week’s changes to mortgage qualifications primarily affecting first-time buyers ensures that borrowers can withstand future increase in mortgage rates. It’s likely the first of many pre-emptive measures that will be put in place to reduce overall risk in the marketplace.”
Although Cohen believes that it is unlikely Toronto will follow in Vancouver’s footsteps, there are fears that the provincial government will levy a transfer tax of some sort on foreign entities sometime soon. Alternatively, the Chinese government may enforce an investment limit. Cohen says that either scenario would have far-reaching implications for the Canadian housing market.
Meanwhile, demand for high-end properties is continuing at a high rate, which may amount to another record year of home-buying activity in 2016.