Rightsizing boomers putting pressure on the luxury condo market

We already know that the Greater Toronto Area resale market ended the first half of the year on a high note, and it looks like the luxury market did, too. 

Sotheby’s International Realty Canada just released its 2019 Mid-Year Top-Tier Real Estate Report, focusing on home sales over $1 million in Canada’s largest markets. Due to strong population gains, a stable labour market, healthy employment rate and increasing household budgets, the GTA’s top-tier market was pretty active in the first six months of the year. 

During the first half of 2019, there were 8,612 home sales above $1 million in the GTA, which is a 12% year-over-year increase. The majority of the sales were in the $1-2 million range, of which there were 7,449 (an increase of 13%). In the $2-4 million range, sales increased 9% with 1,060 units sold. 

When it comes to home sales above $4 million, Sotheby’s has noticed a recent trend of listing off of the MLS system, so while there was a 19% drop with only 103 sales, it’s likely due to many of these higher priced homes selling privately. 

In the City of Toronto, home sales above $1 million increased 13% with 3,992 units sold in the first six months of the year. Like the GTA as a whole, the majority of the top-tier home sales in Toronto were in the $1-2 million range, followed by the $2-4 million range. There were only 89 home sales above $4 million, which is 2% lower than the same period last year.  

“Toronto’s revitalized top-tier market reflected renewal in consumer psychology now that the impact of recent policy and mortgage lending changes have been assimilated, as well as broader renewal of confidence in the nation’s economic performance,” says Don Kottick, President and CEO, Sotheby’s International Realty Canada.

These four areas are Toronto’s most luxurious neighbourhoods and their average selling prices:

Bridle Path-Sunnybrook-York Mills: $4,770,716
Rosedale-Moore Park: $3,649,799
Forest Hill: $3,356,849
Lawrence Park: $2,319,887

Sotheby’s refers to the $1 million+ homes as “top-tier,” but in the GTA, the average detached home was above $1 million in June 2019, according to the Toronto Real Estate Board. Detached home prices are moderating slightly, but it’s not that surprising to see that home prices in the $1-2 million range increased in the first two quarters of 2019.

With pressure on the single-family home market, some demand is spilling over into the top-tier condo market. In the first half of the year, $1 million+ condo sales increased 10% with 722 units sold in the GTA. There were 638 units sold in the $1-2 million range, which is an increase of 12%, and $2-4 million condo sales remained steady with 80 sales. In the first six months of 2018, there were nine condo sales above $4 million, but there were only four this year. 

According to Sotheby’s, the demand for top-tier condos will be strong through the third quarter of 2019 as the population continues to grow and baby boomers look to “rightsize.” As those aged 55+ sell their high-priced single-family homes, many will look to larger condo suites so they don't have to sacrifice as much space. 

The GTA already has affordability issues, and now with millennials and boomers eyeing the condo market, it looks like condo prices are going to keep rising.