Top-Tier Report

2021 FALL FORECAST

National Summary

Canada’s metropolitan luxury real estate markets continue to reflect unprecedented circumstances leading into fall 2021. Following record-shattering sales across major markets through the first half of 2021, pandemic-related influences continue to motivate consumer housing activity, driving new demand for urban real estate as downtown cores revitalize and consumer confidence in higher density, city living continues to rise. However, the supply of available top-tier real estate is deficient in relation to housing needs, constraining sales across multiple market segments, limiting housing mobility, and accelerating price gains as a result. With an unsatiated undercurrent of demand across every major market and a new wave of prospective real estate consumers imminent, rising prices and steady activity are forecasted for fall. New data compiled by Sotheby’s International Realty Canada reveals that the Greater Toronto Area (GTA) is positioned to see continued price acceleration in an active fall market, even as the region’s acute shortage of conventional and luxury housing supply caps overall activity. An unexpectedly active summer resulted in residential real estate sales over $4 million rising 12% year-over-year in July and August 2021, with six ultra-luxury properties sold over $10 million compared to four properties sold in this price range over the same months in 2020. As in other major metropolitan markets, the GTA luxury condominium market strengthened as confidence in urban living continues to rise. As a result, sales of luxury condominiums over $4 million were up 40% year-over-year to seven units sold in the GTA in July and August, with one ultra-luxury unit selling over $10 million on MLS compared to a lack of transactions in this price range in the summer of 2020. This outpaced the percentage gains experienced in luxury single-family home sales over $4 million, which saw a 15% year-over-year increase from the summer months of 2020. Residential sales over $4 million between September 1–15 reflect underlying consumer demand for premier real estate leading into fall, as sales increased 33% year-over-year. Vancouver’s luxury market is poised to see some relief from the extraordinary pace and price gains experienced over its prolonged sellers’ market but continues to confront the challenges of the region’s chronic and significant deficit of conventional and high-end housing supply. Overall residential sales over $4 million increased 13% year-over-year in July and August 2021, with one ultra-luxury property sold on Multiple Listing Service (MLS) over $10 million during this time. Top-tier condominium sales also strengthened as confidence in city living revived; summer sales over $1 million increased 22% year-over-year, while luxury condominium sales over $4 million remained steady at 2020 summer levels with nine units sold. At the same time, luxury single-family home sales over $4 million increased 14% year-over-year in July and August, while one home sold over $10 million on MLS compared to three in the summer months of 2020, reflecting sellers’ increased requirements for privacy. A new real estate record was set for Greater Vancouver during this time, with Sotheby’s International Realty Canada’s exclusive sale of the highest priced single-family residential sale on a single lot in the region’s history. Residential real estate sales over $4 million in the first 15 days of September reflected a delayed start to the fall market, as well as the forthcoming challenges of inventory shortages for increasingly frustrated and hesitant buyers. $4 million-plus residential sales declined 68% year-over-year, with none of these selling above $10 million compared to one ultra-luxury above this price point on MLS in the same period of 2020. Montreal experienced a fleeting seasonal sales slowdown as consumers and the industry briefly withdrew from a heated sellers’ market that set new records through the first half of 2021, but the brevity of this lull and the market’s swift rebound of luxury sales in early fall points to a dynamic and active season ahead. In face of strong consumer demand, the city is set to face the twin challenges of a significant provincial deficit of conventional and luxury housing, and price acceleration in turn. Over July and August, residential real estate sales over $4 million were up 50% year-over-year; while $1 million-plus sales contracted 17% over the summer months, they were up 26% year-over-year in the first 15 days of September. Three luxury sales took place over $4 million between September 1–15 where there had been no transactions of this magnitude in the same period last year. The summer seasonal slowdown resulted in singlefamily home sales over $1 million declining by 24% year-over-year in July and August, even as $4 million-plus sales increased 40%, before resurging in the first weeks of September. Montreal’s luxury condominium market has been experiencing striking gains: sales over $1 million were up 30% year-over-year over in the summer months and jumped 125% year-over-year in the first 15 days of September, signalling strength in this sector in the fall ahead. Calgary’s luxury residential real estate market, which had gained steady traction since the start of the year, evolved into a true sellers’ market over the summer and is poised for more balanced market conditions this fall. With the recovery of the oil and gas industry and provincial economy, as well as the re-opening of the province, strengthening consumer optimism, residential sales over $1 million increased 50% year-over-year in July and August. The city’s market-dominant single-family home segment saw sales over $1 million increase 53% year-over-year during this time; meanwhile, condominium sales over $1 million in this well-supplied segment saw sales double from previous year’s levels to six units sold over the summer months.

Key Influences

SEVERE INVENTORY DEFICIT SPARKS PRICE GAINS, UNDERMINES SALES

A severe shortage of conventional and luxury inventory across Toronto, Vancouver and Montreal undermined potential sales across the conventional and luxury markets for condominiums, attached, and single-family homes, and will continue to thwart transactions this fall. Calgary, which tipped into true sellers’ market conditions over the summer months and saw diminished supply sparking bidding wars for premier single-family homes, is projected to experience more balanced conditions. Frenetic sellers’ markets that drove luxury residential sales over $4 million up year-over-year by 276% in the GTA, 152% in Vancouver, and 133% in Montreal over the first half of 2021, incited heated bidding wars that increased housing prices to historic highs. Sales tapered briefly over the summer as frustrated and fatigued home buyers withdrew from the market, while prospective sellers reconsidered the challenges of navigating market conditions that ofered limited choices should they place their home on the market. The lulls in these markets were brief and masked underlying consumer demand. Activity has resurged in the preliminary weeks of fall. While a balanced market is anticipated for Calgary, extreme demand-supply housing imbalances across Toronto, Vancouver and Montreal are deeply embedded. This is now revealing itself in increased activity in the comparatively accessible top-tier condominium market, buyer fatigue and hesitancy, market conditions that almost universally skew in favour of sellers, and continued price gains in the months ahead.

RETURN TO CIT Y LIVING IGNITES URBAN SALES & CONDOMINIUM DEMAND

Although the pace of recovery was uneven across major metropolitan markets, most Canadian jurisdictions had near-final stages of public health reopening plans in place by August 2021, with restaurants, entertainment venues, retail and personal service businesses, and recreational facilities generally open at varying capacity requirements. Furthermore, non-essential travelers from the U.S. who were fully vaccinated were permitted to enter the country without quarantine requirements as of August 9, expanding business vitality in downtown areas. With broadening immunization coverage increasing public confidence, city centres and downtown cores re-energized at a faster pace than any point in time since the pandemic’s inception in March 2020. As a result, demand for luxury real estate in the heart of Canada’s major urban centres has increased more steeply, most notably, in the market for high-end condominiums. This has been further magnified by the shortage of single-family and attached home supply, and resulting affordability challenges, which are compelling prospective buyers across every generation into condominiums out of necessity. In recent months, across every metropolitan market, top-tier condominium sales activity has exceeded industry projections and contradicted anticipation of a seasonal summer slowdown. In the GTA, which has seen demand for luxury condominiums steadily increase since the start of 2021, sales of luxury condominiums over $4 million were up 40% year-over-year in July and August. Montreal’s luxury condominium sales surpassed optimistic industry expectations over the summer months, as $1 million-plus sales increased 30% year-over-year, with $4 million-plus condominium MLS# 26219163 sales remaining consistent. Similarly, sellers’ market conditions were sustained in Vancouver’s top-tier condominium market through the summer, as sales over $1 million increased 22% year-over-year and luxury condominium sales over $4 million remained on par with 2020 levels. Calgary’s conventional and luxury condo market, with ample supply that heavily skewed the market in favour of buyers for several years, saw a noteworthy increase in luxury activity: in July and August, $1 million-plus condominium sales doubled from previous year’s levels, and consumer and investor enquiries rose significantly. With post-pandemic urban life reinventing itself, revitalized consumer and investor confidence positions every major metropolitan luxury condominium market for steady gains this fall.

JOB GAINS BOLSTER TOP-TIER REAL ESTATE SALES

Steady, albeit uneven, gains in the Canadian job market have supported positive consumer confidence across the conventional and luxury housing market. Employment rose for a third consecutive month in August 2021, up 0.5% year-over-year, while the unemployment rate fell by 0.4% to 7.1%, the lowest rate since the pandemic’s start. During this time, unemployment rates fell in every major metropolitan real estate market. Vancouver’s August unemployment rate saw the most dramatic decline as it fell to 7.1% (down 5.9% year-over-year), while Montreal’s unemployment rate fell to 7.0% (down 4.9% year-over-year). Although unemployment rates in Toronto and Calgary remained above the national average, they also decreased to 9.3% in Toronto (down by 4.7%) and to 9.6% in Calgary (down by 4.8%). Although the economic and labour market recovery remains deeply unbalanced, its improvement, particularly for mid/high wage sectors has bolstered confidence and will continue to support the recovery of Canada’s conventional and luxury housing market in the months to come.

GAP BET WEEN LUXURY AND CONVENTIONAL HOUSING TRENDS WIDEN

The impact of the pandemic has differed across Canada’s housing markets and property types; however, a defining factor has been the extraordinary demand for luxury real estate relative even to the heated demand for conventional housing. Steep gains in luxury sales have been attributed to significant shifts in consumer housing needs with the pandemic, and the increased willingness and capacity for affluent home buyers to invest in housing necessities and luxuries. Over the course of 2021, this has resulted in several historic, recordbreaking sales, including Sotheby’s International Realty Canada’s sale of the highest-priced condominium in Québec’s history in Montreal, and its recent sale of the Greater Vancouver region’s highest single-family residential sale on a single lot. According to Sotheby’s International Realty Canada experts, the gap between luxury and conventional consumer market behaviour and trends is set to widen. On one hand, luxury real estate consumers will continue to drive new levels of activity in the metropolitan and recreational housing markets to fulfill post-pandemic lifestyle needs and tastes. Extensive luxury home renovations, as well as elevated luxury amenities and finishings driven by this consumer group will permanently transform luxury housing stock and place upward pressure on future high-end real estate prices. This cohort will also be at the forefront of accelerating intergenerational wealth transfer into the single-family home market. At the same time, the desire for elevated levels of privacy and discretion amongst this cohort, will shift an increasing number of ultra-luxury transactions to exclusive global sales and marketing networks. At the same time, first-time buyers and conventional housing purchasers face increasing barriers, particularly in the single-family home market, given rising prices, tighter mortgage qualification criteria and the risk of eroding buying power given recent inflation. Sotheby’s International Realty Canada continues to underscore the urgent need for new housing supply across the rental, vertical, lowdensity and high-density spectrum to support residential mobility, and to ensure housing affordability for more Canadians

Vancouver

Following an extraordinary sales surge in the first half of the year that saw luxury residential real estate (condominiums, attached and single-family homes) sales over $4 million and $10 million soar 152% and 300% above 2020 levels, the City of Vancouver’s luxury market continued to see steady demand over the summer. Despite a significant shortfall of top-tier supply, acute buyer fatigue given 2021’s frenetic sellers’ market conditions, plus a brief seasonal slowdown as pandemic-weary real estate consumers paused activity to enjoy the summer, $4 million-plus sales continued to gain ground over July and August. According to Sotheby’s International Realty Canada experts, confidence in the city’s luxury real estate market is resolute leading into the fall, particularly as the Metro Vancouver economy continues to bounce back from its pandemic-driven recession in 2020, regaining approximately 250,000 jobs. In addition to resilient local demand, the culmination of months of backlogged foreign interest from prospective permanent residents, new Canadians, returning expatriates, and investors, is expected to translate into additional activity as international travel resumes, although local demand dominates. While the fevered pitch of the market experienced in the first half of 2021 is set to normalize, enduring consumer demand and the city’s substantial deficit in top-tier inventory is projected to support price gains and a robust fall market ahead. Overall residential sales over $4 million in the City of Vancouver saw a 13% year-over-year increase to 53 properties sold in July and August 2021, with one ultra-luxury property sold on Multiple Listing Service (MLS) over $10 million during this time, compared to three sold in this price range during the same period in 2020. The true strength of the city’s ultra-luxury housing market was reflected in private and exclusive sales of MLS, a segment that has expanded significantly as sellers seek discretion and privacy. This included Sotheby’s International Realty Canada’s private sale of Belmont Estate in July 2021, which set a historic price record as Greater Vancouver’s highest single-family residential sale on a single lot. Over the summer months, residential sales between $2–4 million and $1–2 million remained stable from previous year’s levels, with a marginal 1% and 2% year-over-year decline to 222 and 524 properties sold respectively. Overall, July and August residential real estate sales over $1 million held steady at last summer’s levels, with an inconsequential 1% dip to 799 properties sold. In the first 15 days of September, residential real estate sales over $4 million reflect a delayed start to the fall market due to consumer and industry’s extended “summer slowdown” mindset, and some trepidation about engaging in the market so early in the fall given uncertain outcomes of the Federal election, and previous prolonged inventory starved market conditions. Preliminary fall performance suggests inevitable normalization of luxury activity following an extraordinary 2021 to date. $4 million-plus residential sales were down 68% year-over-year to seven properties sold, with none of these transacting over $10 million compared to one sale above this price point in the same period of 2020. Since the fall, luxury and ultra-luxury inventory have come into a better balance from previously tight conditions; however, multiple offers in premier neighbourhoods on sharply priced properties are still a norm. Luxury sales between $2–4 million contracted 15% to 40 properties sold while sales between $1–2 million decreased 31% to 107 properties sold during this time. Overall residential sales over $1 million contracted 31% to 154 properties sold during this period. Canada’s largest metropolitan luxury real estate markets experienced some of their strongest summer gains in the condominium segment, and the City of Vancouver was no exception. The reopening of businesses and workplaces in the downtown core, as well as increasing COVID-19 immunization coverage rates, continue to revitalize confidence in urban, high-density living. According to Sotheby’s International Realty Canada experts, rising local and global confidence in the local condominium market is motivating investment-minded end users to purchase in the city. At the same time, rising single-family and attached home prices continue to shift prospective homebuyers into the condominium market out of necessity. Overall, in July and August, top-tier condominium sales over $1 million rose 22% year-over-year to 238 units sold, while luxury condominium sales over $4 million remained on par with 2020 summer levels at nine units sold. During this time, $2–4 million sales fell 24% to 29 units sold, while $1–2 million condominium sales increased 35% year-over-year to 200 units. Luxury condominium sales in the first 15 days of September reflected normalizing conditions from the unsustainable pace endured earlier in the year. However, underlying demand and confidence is firm, and sales will remain swift in a fall market that remains skewed in favour of sellers. Condominium sales over $1 million totalled 48 units, down 8% year-over-year, while one condominium sold over $4 million, whereas four transactions were reported during this period in 2020. Five units sold between $2–4 million sales, up 25% from four sold in the first 15 days of September 2020 while $1–2 million condominium sales contracted 5% to 42 units sold in the first 15 days of September. Luxury single-family home sale activity saw greater sales gains than that in the conventional single-family home market, as home sales over $4 million increased 14% year-over-year to 42 homes sold in July and August. One home sold over $10 million compared to three in the summer months of 2020. High-end single-family home sales between $2–4 million remained largely consistent with 2020 levels with a 1% decline to 173 homes sold over the summer months. In contrast, conventional single-family home sales between $1–2 million fell 24% to 176 units, reflecting the lack of viable inventory in this price range, as the benchmark price for a singlefamily home in Vancouver West and Vancouver East rose 12.2% and 12.4% year-over-year respectively to $3,462,200 and $1,689,700 in August 2021, prompting the retreat of discouraged purchasers to higher density housing options. Overall, single-family home sales over $1 million were down 12% year-over-year to 391 properties sold in the summer months.

Top-tier sales from September 1–15 reflect the strains of conventional and luxury inventory shortages across the city’s single-family housing market. Luxury sales over $4 million fell 71% to five homes sold from the same period of 2020. While one ultra-Top-tier sales from September 1–15 reflect the strains of conventional and luxury inventory shortages across the city’s single-family housing market. Luxury sales over $4 million fell 71% to five homes sold from the same period of 2020. While one ultraluxury home sold over $10 million during this period in 2020, no transactions were recorded over this price point in the first 15 days of September this year. $2–4 million and $1–2 million sales were down 23% and 48% year-over-year to 30 and 37 homes sold respectively. Overall, $1 million-plus single-family home sales fell 43% year-over-year to 72 homes sold between September 1–15 to start the fall. Vancouver’s luxury attached home market continued to reflect strong consumer demand and tight market conditions over July and August. Two luxury attached homes sold over $4 million during this time, compared to one sale in the summer months of 2020, while $2–4 million sales surged 67% to 20 units sold. Sales of attached homes between $1–2 million contracted 6% year-over-year to 148 homes sold. With 170 attached homes sold over $1 million across July and August, top-tier home sales remained on par at summer 2020 levels. Luxury attached home sales in the first half of September continued to reflect the significant shortfall of top-tier housing inventory in face of consumer need and demand. As in 2020, there were no attached home sold over $4 million this September 1–15; during this time, five $2–4 million attached homes sold compared to four sold in the same period in 2020. $1–2 million attached homes, highly coveted given the city’s elevated single-family housing prices, were down 30% to 28 homes sold in the first 15 days of September, reflecting a sheer lack of available supply. Overall, attached home sales over $1 million were down 24% year-over-year in the first 15 days of September a reflection of continued attached home shortages to be anticipated in the fall. Local and international demand for urban luxury real estate in Vancouver has clearly rebounded, and the city’s condominium market will continue to experience notable activity in the fall ahead. However, normalizing demand trends, and the region’s sustained shortage of single-family and attached home supply will impede sales activity in the months ahead.

Calgary

The City of Calgary’s once deeply entrenched buyers’ market flipped to a true sellers’ market in July and August. Strengthening fundamentals, including diminishing housing inventory, the resurgence of the provincial economy and loosening COVID-19 restrictions, revitalized confidence and engagement in the city’s top-tier real estate market. Bolstered by the re-opening of the province and Calgary’s resilient “return to normal” spirit, those contemplating a move outside of the city centre reconsidered the now tangible benefits of living and reinvesting in its reviving urban core. In addition to recovering local demand, the city has also been seeing an uptick in remote work-empowered buyers and investors from other provinces, including British Columbia and Ontario, seeking comparatively affordable luxury real estate or a return to their original home province. These factors have led to what Sotheby’s International Realty Canada experts are predicting will be a balanced top-tier real estate market in the coming months, albeit tenuously. While ongoing economic gains will continue to support sales activity, recent concerns surrounding rising public health risks have tempered local sentiment. Previously heated segments of the market have also come into better balance, with a decline in bidding wars and multiple offers compared to the summer months. According to the Calgary Real Estate Board, total residential real estate sales in the City of Calgary rose 37% year-over-year in August, reducing once healthy inventory levels by 7% from the year prior. Consumer demand, coupled with limited luxury and conventional real estate, contributed to price increases across all property types with single-family, semi-detached, row and apartment housing prices increasing 10.6%, 9.9%, 8.0%, and 2.3% year-over-year, respectively. At the same time, luxury residential real estate sales over $1 million (condominiums, attached homes and single-family homes) experienced significant gains in activity over the summer months. In July and August 2021, 316 properties sold over $1 million, up 50% from the same period in 2020. Of these, 279 properties sold between $1–2 million, up 47% year-over-year and 36 units sold between $2–4 million, a 100% gain from 2020. One property sold over $4 million over the summer months on Multiple Listings Service (MLS), down from two units sold during this period in 2020. As in 2020, there were no sales reported in the ultra-luxury $10 million-plus price point during this time. Of particular note was Calgary’s condominium market, which outperformed industry expectations over the summer months. The city saw the highest condominium sales for the month of August in the last six years, according to the Calgary Real Estate Board; this underscores resurging confidence in the downtown core and refutes the narrative that suburban living is exclusively the new norm following the pandemic. Instead, a fresh cohort of buyers and investors are seeing the appeal and potential of urban living and seeking out the liveliness of a bustling downtown after over a year of pandemic-induced stagnation. Reviving condominium demand trickled into the luxury market: in July and August, condominium sales of over $1 million doubled from previous summer’s levels to six properties sold, all within the $1–2 million price point. In the first 15 days of September, condo sales over $1 million were up from 2020 with three properties sold, compared to two units sold in the first half of September 2020. Despite strengthening condominium sales, an oversupply of inventory relative to demand kept prices in check; in August, Calgary saw 332 condominium sales and 1,786 units of inventory – equating to roughly five months’ worth –and the healthiest amount of inventory across all housing types in the market.

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