Rising wealth, foreign investment drives demand for luxury homes; Metro Vancouver leading the way

Vancouver Sun, May 18th, 2011

Demand for luxury homes across Canada – especially in Metro Vancouver – is rising, with the improved financial standing of wealthy Canadians the main factor, according to a report released Wednesday by Re/Max.

“The strength of the upper-end segment continues to defy expectations,” Elton Ash, regional executive vice-president, Re/Max of Western Canada, said in a statement.

“That demand remains largely domestic speaks to the solid underpinnings of the market, while underscoring the appeal of Canadian real estate on an international stage. Western Canada, in particular, will continue to see the upside benefit of investment from abroad.”

According to the report, the improved financial standing among high net worth people is the major factor

driving strong sales activity at the top end of Canada’s housing markets,.

Re/Max examined 12 major centres and found that luxury sales have surged in close to two-thirds of housing markets between January 1 and April 30 of this year, compared to the same period in 2010.

In terms of percentage increases over the four-month period, Metro Vancouver – where foreign investment has also played a major role – lead the way with a 118-per-cent increase, from 343 $2 million-plus homes sold in 2010 to 747 $2 million-plus homes sold in 2011.

That was followed by Ottawa (59 per cent), Calgary (51 per cent), Halifax-Dartmouth (27 per cent), Winnipeg (24 per cent), Hamilton-Burlington (13 per cent) and Greater Toronto (nine per cent).

Six of the seven major cities – except Calgary – are poised to set new records in top-end activity by year-end.

Price points were lower in the other markets, with a luxury home in Winnipeg, for example, considered anything over $500,000.

“Greater Vancouver’s luxury market continues to show unprecedented strength, with the number of sales over $2 million more than doubling in the first four months of 2011,” the report said.

“Despite the robust activity, housing values in the top end of the market have climbed a nominal two per cent, rising from $2,955,168 to $3,025,947 year-over-year. “Days on market have fallen to 48 from 54 one year ago, although some properties are moving within days in coveted neighbourhoods. Purchasers from the Greater

Vancouver Area and Mainland China are driving sales in the top-end, with demand strongest for properties in Vancouver’s Westside (447 sales), followed by West Vancouver (160), and Richmond (41).

“Detached properties remain the most popular type of housing [in Metro Vancouver], comprising the vast majority of luxury sales at 673 units. Condominiums are a very small percentage of the market, with 58 sales occurring over $2 million.”

The report said that while foreign investment has augmented sales activity in several Canadian markets, its influence was only significant in MetroVancouver. Most regions reported that locals were the primary drivers of demand for luxury homes.

The report suggested that there are several factors that position Canada as an attractive option for buying luxury homes, including that its real estate remains a bargain by international standards, given its ranking for quality of life, political and economic stability and the strength of its property laws.

“Three key factors – serious equity gains, stock market recovery, and improved economic performance – have

been behind the push for luxury housing product across the country,” Michael Polzler, executive vice-president, Re/Max Ontario-Atlantic Canada, said in a statement. “The combination also continues to bolster the bottom line of high net worth individuals both nationally and globally. The impact of that wealth is being seen in the demand for all things luxury—from homes to cars, collectibles and fine wines.”

Re/Max noted that the number of millionaires is rising in Canada, and will continue to do so, and that residential holdings have increased among the wealthy.