Baby boomers and millennials fuelling the luxury condo market
By Newinhomes on Oct 24, 2018
The 2018 RE/MAX Spotlight on Luxury Report was released recently, reporting a significant drop in luxury detached home sales in Toronto and Vancouver. But, the luxury condo market is going strong.
Sales of detached homes priced in the $1-3 million range fell 37% year-over-year in Toronto, and dropped 31% in Vancouver. The same can’t be said for the luxury condo market. Condo sales in the same price range increased 2% in Toronto, 6% in Vancouver, and 19% in Victoria.
The report says millennials and baby boomers are the driving forces behind the increase in luxury condo sales.
“Many Canadian baby boomers saw the strength of the real estate market over the past two years as an opportunity to cash-in, downsize and upgrade into the luxury market for retirement,” says Christopher Alexander, Executive Vice President and Regional Director, RE/MAX INTEGRA Ontario-Atlantic Canada Region. “We’re also seeing an emerging trend of millennials entering the lower end of the luxury condo market, as they tap into their inheritance to invest in this popular property segment.”
The fact that some millennials are at a point in their life where they are receiving an inheritance is not something we had considered until reading this report. Is it possible that millennials will no longer be the most indebted generation because their wealthy/well-off parents are passing away? Maybe it really is time to start focusing on making homes affordable for Generation Z.
Another surprising finding in the report is that it says the foreign buyers tax is actually making an impact.
“The foreign buyers tax has impacted overseas activity, opening more opportunities for local buyers to enter the luxury market,” says Elton Ash, Executive Vice President, RE/MAX of Western Canada. “As a result, local buyers are driving demand for luxury condos going into 2019, which is welcome news for developers in major city centres looking to build more properties.”
In the Greater Toronto Area, the share of foreign buyer activity was just under 6% at the end of May 2017. After the tax was implemented, foreign buyer participation fell to just over 2% as of the end of February 2018. We suppose this small percentage drop still means there were a few more homes available for local buyers.
In Vancouver, home sales above $3 million fell 45% in the detached home market and 13% in the condo market. In Toronto, detached sales above $3 million decreased 44%, while luxury condo sales remained unchanged.
The most expensive condo in Toronto sold for $11.5 million, which is 44% higher than the highest priced condo sale last year ($8 million). Vancouver’s priciest condo sale was for $11.7 million, which is 34% above last year’s highest priced unit ($8.7 million).
As more boomers retire and more millennials receive inheritance, it seems like Toronto’s luxury real estate market will remain strong through 2019.
