On Monday, the Government of Canada announced a series of amendments to the foreign buyer ban — officially called the Prohibition on the Purchase of Residential Property by Non-Canadians Act — to expand the exceptions to the regulations, some of which have become an unintended thorn in the sides of developers across the country.

The four amendments to the foreign buyer ban are effective immediately, as of March 27, 2023, and are as follows.

The Foreign Control Threshold is Now 10%

While the foreign buyer ban was originally created with individual Canadians and the resale market in mind, a less-discussed aspect of the ban was its effect on the development industry, particularly with the legislation deeming an entity as foreign if non-Canadians owned 3% or more of it.

In the short months since the ban came into effect on January 1, this 3% has been repeatedly cited by developers as overly-restrictive, specifically for real estate investment trusts (REITs). With the amendment, the maximum amount of non-Canadian control in a REIT subject to the foreign buyer ban is now 10%.

Purchasing for the Purpose of Development

Perhaps even more of a relief is the new exception that allows non-Canadians to purchase residential property, if the purpose is development. Previously, this exception was only applicable to publicly-traded corporations.

According to a CMHC FAQ, “development” does not include “the mere purpose of leasing or renting the property out to tenants or otherwise managing it as a rental property as part of its portfolio.” Repairs, renovations, and remodeling also do not count as “development,” but the CMHC notes that some expansions or remodels that are “tantamount to the construction of a new building or a change of use” — such as one that would create a new residential property — do, and will now be allowed.

The Ban No Longer Applies to Vacant Land

Under the previous regulations, vacant land zoned for residential use or mixed-use with residential could not be purchased by non-Canadians.

The Government of Canada is now repealing that restriction — Section 3(2) — and with the change, non-Canadians can now purchase vacant land zoned for residential use and use it for any purpose.

The Ban No Longer Applies to Work Permit Holders

A common criticism of the foreign buyer ban has been that it seemingly contradicts the federal government’s lofty immigration goals, or even gives the appearance of xenophobia, by limiting the ability of those who may be looking to settle down in Canada from buying homes.

Now, those who hold a work permit or are authorized to work in Canada are allowed to purchase residential property, so long as they have 183 days of validity, or more, remaining on their permit, and have not purchased more than one residential property.

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OTTAWA - The annual inflation rate slowed more than expected in January, suggesting the Bank of Canada is likely content with its decision to pause rate hikes as price pressures continue to ease.

In its consumer price index report released Tuesday, Statistics Canada said the deceleration in headline inflation to 5.9 per cent in January from 6.3 per cent in December reflects a base-year effect.

A base-year effect refers to the impact of price movements from a year ago on the calculation of the year-over-year inflation rate.

Given much of the acceleration in price growth happened in the first half of 2022 as the threat of Russia invading Ukraine turned into a reality, the federal agency said the annual inflation rate will continue to slow in the coming months.

The last time Canada's annual inflation rate was below six per cent was in February 2022 when it was 5.7 per cent.

The headline rate came in lower in January than many commercial banks were anticipating in their forecasts, signalling good news for the Bank of Canada.

Last month, the Bank of Canada hiked its key interest rate for the eighth consecutive time since March 2022, bringing it from near zero to 4.5 per cent. That's the highest it's been since 2007. At the time, the central bank said it would take a “conditional” pause to assess the effects of higher interest rates on the economy.

In an interview, BMO chief economist Douglas Porter said the positive surprise in Tuesday's report was “very welcome,” but noted some of the decline in headline inflation had to do with one-off events. For example, prices for cellular services were down because of extended Boxing Day sales.

“On balance, this slightly takes the pressure off of the Bank of Canada,” Porter said, adding that another hike at the central bank's next rate decision on March 8 is most likely off the table.

On a monthly basis, higher gasoline prices in January drove the overall price level higher compared with December. The federal agency said the consumer price index rose 0.5 per cent in January after declining by 0.6 per cent a month prior.

According to its most updated forecast, the Bank of Canada anticipates the annual inflation rate to fall to about three per cent by mid-year. A return to its two per cent target is expected in 2024.

So long as the economy and inflation evolve in line with the Bank of Canada's forecasts, the central bank estimates it won't need to raise rates further.

Though Canadians will start seeing the headline rate fall more noticeably in the coming months - barring unexpected global events - economists have noticed price pressures easing for months now.

According to BMO, the three-month annualized inflation rate is hovering at about 2.4 per cent, suggesting inflation is headed toward target.

But from an affordability standpoint, RBC economist Claire Fan said “the pain is still there,” given higher prices are already baked into the economy.

“It's really hard to wrap our heads around the idea that lower inflation doesn't equal outright deflation,” Fan said.

Though headline inflation is inching closer to target, Canadians saw no slowdown in the cost of groceries last month as prices rose faster on a year-over-year basis.

Grocery prices were up 11.4 per cent compared with a year ago, marking an acceleration from 11 per cent in December. The federal agency said prices for meat, bakery goods, and vegetables all rose faster.

Porter said the food inflation was the “one piece of bad news” in the January inflation report.

The chief economist stressed that soaring grocery prices is a global phenomenon, noting it is “not a Canadian story alone.”

Some factors playing into this, he said, include avian flu affecting poultry products and the war in Ukraine affecting vegetable oil and grain prices.

Fan said although Canadians have yet to see grocery prices ease, lower commodity prices will eventually feed through the supply chain to retail prices.

“It's just taken a bit longer than many had expected.”

This report by The Canadian Press was first published Feb. 21, 2023.

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TORONTO — Canadians, who have watched the cost of a mortgage rising steadily over the past year, took another hit when the Bank of Canada hiked its interest rate to 4.5 percent on Wednesday.

The hike is the eighth in less than a year and was accompanied by the central bank, which said the rate is likely to remain at 4.5 percent unless Canada’s stubbornly high inflation rate falls short of its 2 percent target.

The rise in interest rates is bound to weigh on prospective homeowners and mortgage holders as mortgage rates tend to move in tandem with changes in interest rates.

Here’s a look at what Wednesday’s announcements will mean for the mortgage sector.

What does this announcement mean for people with mortgages?

An interest rate hike like this one will typically bring about a lot of stress, said Leah Zlatkin, a mortgage broker with LowestRates.ca,

Homeowners with variable rate mortgages, which fluctuate, have seen their rates increase substantially from last year.

Many have already seen their amortization extend as rates have gone up because while their payments have remained steady, they have paid down less principal.

The danger becomes when these people hit their trigger point — when monthly mortgage payments are no longer sufficient.

At that point, your bank will call and adjust your payments, she said.

How much can the average variable mortgage holder expect their mortgage to rise by as a result of these changes?

For every $100,000 of a mortgage with a variable rate, homeowners should expect to pay $20 more per month, LowestRates.ca said.

The company completed several calculations assuming someone had a 15 per cent down payment under $1 million and a 25-year amortization period.

Based on the Canadian Real Estate Association saying the average Canadian home sold for $626,318 last month, a variable rate of 5.25 per cent will mean monthly mortgage payments will total $3,261. At 5.5 per cent, monthly mortgage payments become about $3,341, an increase of $80 per month.

In Toronto, where the Toronto Regional Real Estate Board found the average home sold for more than $1.1 million in December, a variable rate of 5.25 per cent equates to monthly mortgage payments of $5,251. At 5.5 per cent, monthly mortgage payments become roughly $5,378, an increase of $127 per month.

In Vancouver, where the Real Estate Board of Greater Vancouver said the benchmark home price was $1,114,300 last month, a variable rate of 5.25 per cent brings monthly mortgage payments to $5,312. At 5.5 per cent, monthly mortgage payments reach about $5,441, an increase of $129 per month.

If my mortgage is about to be up for renewal, what should I expect?

"There's going to be a situation where a lot of people may be experiencing shock when they renew their mortgage," said Zlatkin.

Because rates have increased so substantially since they signed their current mortgage, they will now see that they likely have to qualify at a much higher rate than before.

Zlatkin recommended that people who foresee themselves in this situation start budgeting now.

"If you think that you're going to renew when you realize that the payment amounts are going to be excessive and you're not going to be able to afford it, you may need to look into refinancing," she said.

That can mean amortizing your mortgage over a longer period of time, but not changing the amount you will pay, but she recommends discussing any potential change with your broker sooner rather than later.

"You don't want to go into a default situation, so you want to be very proactive," she said.

Should I switch between a variable rate and fixed rate mortgage?

"In a rising rate environment, many people are often opting away from variable rate mortgages," said Zlatkin.

However, she thinks making such a switch no longer makes sense for most people because rates have risen so sharply.

When interest rates were around two per cent last year, it was "super cheap" to break a variable rate mortgage. Now that rates have increased so substantially, it's going to cost between one and one and a half per cent to break out of a variable rate mortgage.

"It might just be the wrong time," Zlatkin said.

"Everybody's circumstances are unique, but in 80 per cent of cases you've missed the boat."

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New federal and provincial legislation wnet into effect on January 1 that affect how REALTORS® conduct their business, and who they can conduct business with. 

Here’s a quick summary of what you need to know

The BC Real Estate Association’s (BCREA’s) Standard Forms is updating and revising several existing forms to prepare for the January 1 implementation of the Home Buyer Recission Period (HBRP) in BC. There’ll also be one new form, the Notice of Rescission – Residential Real Property.

The new form, and all the revised ones, will be available on BCREA Standard Forms on January 1. They’ll be accompanied by usage guides and other practical information.

Two new regulations affecting BC’s real estate market went into effect with the start of the new year earlier this week. Here’s the key information you need to know

BC home buyer rescission period

As of January 1, 2023, BC home buyers now have a three-day period in which they can decide to back out of a purchase after signing a contract. If they do, the seller is entitled to 0.25 per cent of the agreed upon sale price of the home as a rescission or “break” fee.

There’s one new form, the Notice of Rescission – Residential Real Property, you'll need to use moving forward. Several other forms, including the Contract of Purchase and Sale (CPS), have been updated and all are available on WEBForms.

Federal foreign buyer ban

The Prohibition on the Purchase of Residential Property by Non-Canadians Act, which prevents non-Canadians from buying residential property in Canada for two years, went into effect January 1.

The federal government recently released the regulations supporting the federal foreign buyer ban, defining what the ban will look like. The Canadian Real Estate Association (CREA) created the Certification and Consent of Purchaser form for you to complete before assisting or advising a potential buyer and use in combination with other due diligence practices. CREA is working to get the form on WEBForms, but you can use the form linked above until it’s there. 

A new ranking is out, analyzing how cities in Canada compare when it comes to housing affordability and supply after they undergo processes, approvals, and charges.

The Canadian Home Builders’ Association has released its 2022 Municipal Benchmarking Study and it examined 21 Canadian municipalities through three categories

Municipal planning approval processes, municipal charges imposed on new development, and municipal approval timelines were reviewed to see whether they help or hurt the development of new home construction.

“This report is intended to support the important conversation with all levels of government, but particularly with municipal governments, on the efficient delivery of much-needed new housing supply, including the impact that inefficiencies and taxes have on housing affordability, which is already a major challenge across the country,” said CHBA CEO Kevin Lee.

After finalizing the results, Edmonton, Charlottetown, and Calgary topped the list, in that respective order, with high scores in two of the three categories reviewed.

At the bottom of the barrel, you’ll find Toronto in 18th, Pickering in 19th, Bradford West in 20th, and Markham dead last in 21st place.

“The study shows significant variations in the approval timelines of municipalities, ranging from 3 months (Charlottetown) to 32 months (Toronto),” states the report. And according to the press release, CHBA’s 2020 Municipal Benchmarking Study compared to 2022 saw municipalities in Ontario have their timelines worsen, while others outside Ontario saw average timelines improve.

The average cost of government charges imposed by municipal governments on low-rise new housing development averages almost $62,000 per unit. Toronto saw charges over $189,000 per unit. And when it comes to high-rise new housing development averages were over $41,000 per unit while Vancouver saw average charges of over $125,000 per unit.

Overall, Canadians understand how expensive it can be to purchase a home, let alone how much they need to make in order to get approved for a mortgage. There’s no surprise here how financially difficult it can be to purchase a home in big cities like Toronto and Vancouver where municipal charges are the highest.

Maybe it’s time to look at cities that offer the best quality of life AND are much more affordable.

TORONTO, Jan. 18, 2023 (GLOBE NEWSWIRE) — Following an era of exorbitant hyperinflation in Canadian luxury real estate, new post-pandemic benchmarks were established in 2022 as the housing market responded to a cascade of stressors. Against a backdrop of mounting economic uncertainty, steep interest rate hikes, escalating inflation, a stubborn deficit of housing inventory and sweeping housing taxation and regulatory changes, prospective luxury real estate sellers and buyers withdrew strategically from the market in anticipation of greater opportunity in 2023. By the end of 2022, the country’s major metropolitan areas emerged from a historic chapter of hyperinflation into a new era where consumer demand for housing and housing mobility remained unrelenting, just as market conditions verged on favouring buyers.

According to new data released by Sotheby’s International Realty Canada, luxury sales activity in the Greater Toronto Area (Durham, Halton, Peel, Toronto and York) receded through the course of 2022, as listings supply faded, and buyers temporarily retreated. Residential real estate sales over $4 million (condominiums, attached and single family homes) fell 24% year-over-year, while ultra-luxury sales over $10 million on Multiple Listing Service (MLS) declined 29% from 2021 levels. Sales of condominiums, attached and single family homes over $4 million fell 29%, 25% and 23% year-over-year, respectively. Overall, $1 million-plus residential sales saw an annual decline of 28%, despite underlying demand for top-tier housing and housing mobility.

Vancouver’s luxury real estate market experienced a sharp decline in sales activity following the first quarter of the year as prospective buyers, frustrated by an era of heated market conditions, paused in anticipation of more favourable opportunities ahead. Overall, residential sales over $4 million and $10 million closed at volumes 30% and 46% below 2021 levels. Luxury condominium sales over $4 million remained stable with a nominal 3% year-over-year uptick, while attached home sales declined 73%. The city’s $4 million-plus single family home saw sales decrease 32% year-over-year, while ultra-luxury single family home sales over $10 million fell 46%. Overall, residential real estate sales over $1 million were down 29% in 2022 from the city’s record sales volume in 2021.

Montreal’s luxury real estate market tempered to more balanced conditions over the course of 2022. The city closed the year with $4 million-plus residential real estate sales nearly on par with 2021 levels, with a modest 2% year-over-year uptick, while sales activity over $1 million experienced an 18% annual decline. Overall, $1 million-plus single family home sales were down 22% year-over-year, while attached home and condominium sales over $1 million fell 23% and 5%, respectively.

Calgary’s luxury real estate market out-performed that of Canada’s largest major metropolitan areas, as the city’s strengthening economic fundamentals ignited consumer confidence and civic optimism and as interprovincial-migration lifted demand for the city’s conventional and top-tier housing. As a result, the city’s top-tier market rebounded in 2022, and sales over $1 million rose 16% year-over-year from 2021 levels. Sales over $4 million increased 50% to six properties sold. $1 million-plus single family and attached homes sales saw 12% and 68% annual sales gains, respectively, while condominium sales over $1 million experienced a significant 79% year-over-year increase.

“After an era of intense hyperinflation, new post-pandemic benchmarks for Canadian conventional and luxury real estate were established in 2022 as the market processed the impact of aggressive interest rate hikes and the effects of an increasingly uncertain global and domestic economic climate. By the end of the year, luxury housing segments in several major metropolitan areas were on the brink of buyers’ market conditions, while others had very clearly shifted into this territory,” says Don Kottick, President and CEO of Sotheby’s International Realty Canada. “The market is now on the verge of another important adjustment, this time in terms of pricing. It has taken several months for home sellers to realize the impact of the changing market on the market values of their properties. As new property listings come onto the market in 2023, their pricing will shift to meet current realities. This will start to unlock long-awaited opportunities for buyers and upsizers to purchase homes that meet their lifestyle needs as they acclimatize to the market.”

According to Kottick, a fundamental deficit of housing across every property type and price category will continue to challenge major metropolitan housing markets, and in particular, Vancouver and Toronto. Although housing prices are expected to adjust downward to realistic market norms in several major metropolitan areas, pent-up demand for housing mobility as well as anticipated population gains from immigration will continue to support housing values in the long term. The “Prohibition on the purchase of residential property by non-Canadians Act” (the “Foreign Buyers Ban”) that came into force January 1, 2023, as well as demand-side policies and taxes will have a negligible effect on affordability, according to Kottick, and have largely served to confuse and frustrate prospective new Canadians at a time when the country is aiming to attract skills, talent and capital.

2022 Top-Tier Market Highlights

Vancouver

Following a frenzied launch into 2022 that propelled luxury real estate sales and prices to record highs through the first quarter of the year, the City of Vancouver abruptly shifted course, adjusting towards a new post-pandemic reality as sales activity and prices calmed in response to climbing mortgage rates and consumer inflation. Despite pent-up consumer demand and widespread need for housing mobility, the city’s luxury market settled to balanced conditions by year’s end as potential transactions were thwarted by sellers with pricing expectations that no longer aligned with market realities, and as buyers prepared to wait for fresh supply at adjusted prices to be introduced in the months ahead.

As home sellers’ and buyers’ willingness to engage in the market faltered in face of swiftly changing conditions, the city’s already scant inventory of luxury real estate evaporated, and with it, sales activity. Overall, luxury residential real estate sales over $4 million (condominiums, attached and single family homes) declined 30% year-over-year to 299 properties sold in 2022, with 13 of these sold above $10 million on Multiple Listing Services (MLS), down 46% annually. Overall, residential real estate sales over $1 million fell 29% to 4,166 properties sold in 2022.

$4 million-plus sales activity in the last half of 2022 reflected the market’s sharp adjustment to multiple interest rate hikes and the flight of real estate buyers and sellers to the sidelines as a result. Despite strong underlying demand, evaporating luxury supply and increasing market uncertainty resulted in a dramatic moderation of the luxury market. Between July 1 – December 31, 2022, residential sales over $4 million decreased 50% to 88 properties sold, while $10 million-plus sales on MLS fell to five properties sold compared to eight sold in the last half of 2021. Overall, $1 million-plus sales were down 48% to 1,346 properties sold in the latter half of 2022.  

Post-pandemic, the City of Vancouver had experienced its initial luxury housing rebound in its single family home segment, resulting in historic highs in sales activity and pricing that peaked in the first quarter of 2022. Through the remainder of the year however, the city’s luxury single family home market normalized. Overall, in 2022, single family home sales over $4 million receded 32% year-over-year to 257 properties sold, while ultra-luxury sales over $10 million fell 46% to 13 sold in 2022. $1 million-plus single family home sales were down 41% year-over-year to 1,744 homes sold.

In the latter half of 2022, luxury single family home sales reflected the market’s rapid shift towards balanced conditions. $4 million-plus home sales fell 51% to 75 homes sold between July 1– December 31, while ultra-luxury home sales over $10 million declined to five homes sold compared to eight sold in the latter half of 2021. Overall, sales over $1 million were down 51% year-over-year to 597 homes sold in the last half of 2022.

The city’s chronically under-supplied luxury attached home market also normalized through the course of 2022, as sales over $4 million declined to three homes sold compared to 11 sold in 2021. As in 2021, there were no ultra-luxury attached home sales over $10 million reported in 2022. Overall, 915 attached homes sold over $1 million in 2022, down 30% year-over-year overall. Luxury attached home sales were quiet in the last half of 2022, reflecting the market’s dramatic normalization. There were no sales recorded above $4 million between July 1 – December 31, compared to three sold in the last half of 2021. Overall, $1 million-plus attached home sales were down 47% year-over-year during this period with 305 homes sold.

Despite strong demand and activity in Vancouver’s luxury condominium market in the first half of 2022, the market calmed in the latter half of 2022, as prospective buyers and investors withdrew from the market in anticipation of continued market moderation. Luxury condominium sales over $4 million were stable, with a nominal 3% year-over-year increase to 39 units sold in 2022, while the ultra-luxury market above $10 million remained quiet, as was the case in 2021. $1 million-plus condominium sales saw an 8% annual decline to 1,507 units sold in 2022.

Luxury condominium sales in the latter half of 2022 reflected the striking pace of moderation experienced across the market. From July 1– December 31, sales of condominiums over $4 million contracted 32% year-over-year to 13 units sold, while $1 million-plus sales fell 43% to 444 properties sold.   

Although the city’s luxury sales activity was subdued in 2022, the undercurrent of demand for Vancouver luxury real estate remains strong, and the city is on the brink of renewed activity in 2023. According to Sotheby’s International Realty Canada experts, the catalysts for the reactivation of the luxury market will be the introduction of fresh property listings selection for prospective buyers and investors in the coming months, as well as widely anticipated price moderation for those listings to meet current market conditions. Both factors are expected to facilitate consumer re-engagement in the 2023 top-tier market.

Calgary

The City of Calgary cemented itself as one of the country’s leading economic and luxury real estate performers in 2022, surpassing other major metropolitan areas in top-tier sales activity and consumer confidence. Commodity price-driven momentum, as well as the city’s flourishing and rapidly diversifying economy bolstered the readiness of luxury home buyers, sellers and investors to transact despite the headwinds of inflation and rising interest rates. Furthermore, Calgary attracted in-migration from other major Canadian regions, most notably Ontario, as young professionals and families seeking a lower cost of living, better quality of life, and attainable conventional and luxury homes flocked to the city.

As a result, Calgary transformed into a healthy and active sellers’ market through the course of 2022, with residential sales over $1 million seeing substantial gains throughout the year, even as days on market fell. Overall, $1 million-plus sales (condominiums, attached and single family homes) increased 16% year-over-year to 1,280 properties sold. The city’s $4 million-plus housing sales increased 50% year-over-year to six properties sold. Consistent with 2021, MLS reported no ultra-luxury home sales in Calgary of over $10 million in 2022.

Calgary’s top-tier real estate market eased slightly in the second half of the year as rising interest rates and the cost of inflation dulled real estate sales between $1–2 million, which comprised 90% of Calgary sales over $1 million in 2022. Overall, residential real estate sales over $1 million contracted 13% to 419 total properties sold between July 1– December 31. During this time, Calgary’s $4 million-plus luxury sales fell to one home sold compared to three sales in the last half of 2021. According to experts from Sotheby’s International Realty Canada, sales activity was hampered in the latter half of the year by a shortage of available inventory rather than a lack of consumer confidence or demand. This underlying optimism is a promising indicator for a healthy market at the outset of 2023.

Comprising 88% of the city’s $1 million-plus residential real estate transactions in 2022, Calgary saw single family home sales over $1 million increase 12% year-over-year in 2022 to 1,126 homes sold. Six single family homes in the luxury $4 million-plus segment sold in 2022, doubling from the three home sales reported in this price segment in 2021. Limited listing availability, rising home prices, and increasing buyer selectiveness led to a slight pullback in sales activity in the latter half of the year. Between July 1 – December 31, single family home sales over $1 million fell by 20% to 354 total properties sold, while luxury single family home sales over $4 million decreased to one home sold, compared to three sold in the last half of 2021. By December of 2022, according to the Calgary Real Estate Board, Calgary’s single family home market posted 23% fewer listings year-over-year overall, with improvements to listing inventory that created more balanced conditions in the market’s higher end.

With the average price of row and semi-detached homes in Calgary up 14% and 9% year-over-year, respectively in December 2022, the city’s luxury attached home market showed strong demand and solid gains in 2022. Overall, $1 million-plus attached home sales surged a significant 68% year-over-year to 111 homes sold in 2022. Consistent with 2021 numbers, there were no $4 million-plus attached home sales reported in 2022. Despite the growing pressures of rising interest rates on entry-level luxury home buyers in the latter half of the year, attached home sales over $1 million were up 44% year-over-year between July 1– December 31, to 39 homes sold.

Calgary’s luxury condominium market posted the strongest year-over-year sales gains of Canada’s largest metropolitan areas in 2022, driven by the revitalization of the downtown core given the city’s strong economic recovery, ongoing job gains and in-migration of young professionals and families. Overall, condominium sales over $1 million increased a notable 79% year-over-year to 43 properties sold. Of these $1 million-plus condominium sales in 2022, 26 did so between July 1–December 31, a substantial 73% year-over-year increase. There were no luxury condominium sales over $4 million in all of 2022, compared to one transaction in 2021.

Boasting some of the country’s most accessible pricing in real estate and now ranking as the third most livable city in the world according to the Economist Intelligence Unit’s 2022 Global Livability Index, the City of Calgary has emerged to prominence on the national stage as a destination market for conventional and luxury housing, as well as a desirable lifestyle. Furthermore, the city’s broadening economy, as well as the Government of Alberta’s projected $12.3 billion budget surplus for 2022 and its projected 2.7% provincial GDP increase for 2023, positions Calgary to weather economic challenges with greater resilience than other major Canadian cities. As a result, Sotheby’s International Realty Canada experts anticipate continued momentum in the city’s luxury real estate market into the initial months of 2023, even as the introduction of new inventory eases the higher-end market to more balanced conditions.

Greater Toronto Area

Consumer demand for luxury real estate in the country’s largest housing market maintained stamina in 2022, even as sales activity and price escalation calmed across the Greater Toronto Area (Durham, Halton, Peel, Toronto and York). As the region absorbed the impact of a rapid battery of interest rate hikes and the pressures of tightening inventory, and as market conditions normalized from the extreme highs of the pandemic era, local demand for housing mobility remained undiminished. According to Sotheby’s International Realty Canada experts, consumer and industry confidence in the long term fundamentals and performance of the local housing market remains unwavering. However, as the market came into balance through the course of 2022, prospective home buyers and investors became increasingly willing to wait for fresh inventory and favourable price declines and less willing to compromise on desired home features and conditions. As a result, luxury properties priced above new market conditions languished unsold on the market, while those in premier condition and priced appropriately for new norms garnered qualified interest and offers, resulting in successful sales.

As a result, following 2021, a year that saw GTA luxury residential real estate sales over $4 million (condominiums, attached and single family homes) soar 224% year-over-year, the market gradually normalized over the course of 2022, resulting in a 24% annual decline in $4 million-plus sales to 611 properties sold in 2022. Ultra-luxury sales over $10 million contracted 29% year-over-year to 22 properties sold on MLS. Overall, real estate transactions above the $1 million mark were down 28% to 38,022 properties sold in the GTA in 2022. Within the City of Toronto, luxury sales over $4 million fell 22% year-over-year to 364 properties sold in 2022. Of these, ten properties sold over $10 million, down 44% from 2021 levels. Overall, top-tier sales over $1 million in the City of Toronto decreased 25% from 2021 to 12,017 properties sold.

Despite robust consumer demand and healthy, albeit moderated levels of activity, luxury sales in the last half of 2022 reflected growing tensions between home sellers with elevated price expectations and buyers prepared to wait for new listings inventory, softening prices and, ultimately, a property that met their criteria. From July 1–December 31, the GTA’s $4 million-plus sales saw a 55% decline to 175 properties sold, while ultra-luxury sales over $10 million fell to six units sold from 16 properties sold in the last half of 2021. During this period, sales over $1 million decreased 50% year-over-year to 11,660 properties sold. City of Toronto sales over $4 million between July 1–December 31 fell 58% year-over-year to 98 properties sold, while sales over $10 million decreased to three units sold compared to ten in the last half of 2021. $1 million-plus sales were down 46% year-over-year in the latter half of 2022, at 3,773 properties sold.

The GTA luxury condominium market gradually de-escalated from its pandemic era of over-exuberance to end 2022 in a more balanced state. Overall luxury condominium sales over $4 million were down a moderate 29% year-over-year to 30 units sold in 2022, with no ultra-luxury transactions over $10 million on MLS compared to two units sold above this price-point in 2021. Overall, $1 million-plus sales were up a modest 6% year-over-year to 3,389 units sold in 2022.

The condo market’s steady normalization was reflected in the last half of 2022, as sales over $4 million fell 52% year-over-year to 13 condominiums sold, while ultra-luxury sales over $10 million remained quiet, as was the case in the last half of 2021. During this period, GTA condo sales over $1 million were down 43% overall to 910 properties sold. Between July 1–December 31, condominium sales over $4 million in the City of Toronto dipped 54% year-over-year to 12 properties sold, while the market over $10 million remained quiet, as was the case in the last half of 2021. Overall, $1 million-plus sales in the city declined 45% year-over-year in the latter half of 2022 to 685 condominiums sold.

The region’s crippling shortage of top-tier attached homes continued to challenge buyers even as market conditions normalized. In 2022, $4 million-plus attached home sales fell 25% from the previous year’s sales levels to 12 homes sold, all in the City of Toronto, while the $10 million attached home segment remained quiet. Overall, attached home sales over $1 million fell 10% to 8,253 homes sold in the GTA. Overall, the City of Toronto $1 million-plus attached home sales were down 26% to 2,780 units sold overall.

Despite underlying demand from diverse consumers, luxury attached home sales activity calmed through the latter half of 2022. In the GTA, two attached homes sold over $4 million compared to 11 units sold between July 1– December 31, 2021, with all transactions taking place within the City of Toronto. During this period, GTA sales over $1 million were down 56% year-over-year to 2,027 properties sold, while $1 million-plus attached home sales in the City of Toronto were down 50% year-over-year to 799 properties sold in the last half of 2022.

In 2022, the GTA’s luxury single family home market evolved to more balanced conditions, even as the temporary withdrawal of sellers from uncertain market conditions amplified the region’s continued deficit of housing supply. Sales over $4 million were down 23% from 2021’s record highs to 569 homes sold in 2022. Ultra-luxury sales over $10 million fell 24% from to 22 homes sold in 2022. Overall, $1 million-plus single family home sales saw an annual decline of 35% year-over-year to 26,380 homes sold. Annual City of Toronto single family home sales over $4 million and $10 million were down 21% and 41% year-over-year to 323 and 10 homes sold in 2022, while sales over $1 million fell 31% to 6,876 homes sold.

GTA luxury single family home sales activity in the latter half of 2022 reflected a market in transition. Luxury sales over $4 million fell to 160 properties sold during this period, down 55% year-over-year, while six ultra-luxury homes sold over $10 million, down from 15 properties sold in the latter half of 2021. GTA single family home sales over $1 million were down 50% year-over-year in the latter half of 2022, with 8,723 homes sold overall. During this time, City of Toronto single family home sales over $4 million fell 57% year-over-year to 84 properties sold. Of these, three homes sold over $10 million compared to nine sold above this price threshold in the last half of 2021. During this time, $1 million-plus sales contracted 48% to 2,289 transactions.

Despite short-term uncertainty, the Greater Toronto Area’s luxury housing market continues to weather the headwinds of rising interest rates, slowing economic growth and mounting consumer inflation from a position of underlying strength, both as Canada’s largest economic region, as well as the country’s top destination for immigration, with 29.5% of recent immigrants to Canada settling in the region, according to Statistics Canada. As sellers’ price expectations moderate in the upcoming months and as inventory levels replenish in premier neighbourhoods in the spring, activity is expected to renew against a backdrop that is now far more favourable to buyers and investors than in recent years.

Montreal

Following a record-breaking 2021 that saw luxury residential real estate sales (condominiums, attached and single family homes) over $4 million soar 171% year-over-year, the City of Montreal’s luxury housing market stabilized to balanced market conditions in 2022. Growing consumer unease with shifting market conditions sparked by multiple Bank of Canada rate hikes, was partially tempered by continued job gains and economic performance in the city. However, despite underlying consumer confidence in both the fundamentals of the economy and the housing market, bidding wars faded from market norms over the course of 2022, and property listings required increased marketing and time on the market to attract qualified offers. While housing prices remained resilient in 2022, they are expected to gradually ease across several conventional and luxury market segments in the coming year.

Overall, Montreal’s $1 million-plus residential sales (condominiums, attached and single family homes) decreased 18% year-over-year to 1,476 total units sold in 2022, while the city’s luxury $4 million-plus market held steady, posting a nominal increase of 2%, with 42 property sales reported in this price segment. Montreal recorded no ultra-luxury $10 million-plus sales on MLS in 2022 compared to two properties sold above this price point in 2021.

Luxury sales activity and velocity slowed markedly in the latter half of 2022 as market uncertainty dampened real estate consumer sentiment. Between July 1 – December 31, top-tier residential real estate sales over $1 million saw an annual decline of 38%, with 509 total properties sold. Of these homes sold, 19 did so in the luxury $4 million-plus price segment, marking a decrease of 30% year-over-year.

Montreal’s luxury condominium market, which has seen a steady influx of new and resale inventory in recent years, remained robust throughout 2022 and experienced a less pronounced year-over-year decline in sales volume than the city’s luxury single family and attached home segments. Overall, top-tier condominium sales over $1 million held relatively steady, contracting 5% year-over-over to 416 total properties sold. Montreal’s luxury $4 million-plus condominium market was notably strong, posting gains of 86% year-over-year to 13 units sold.

Despite resilient local demand for urban, high density luxury housing, the city’s top-tier condominium market calmed in the latter half of 2022 as rising interest rates and general market uncertainty impacted the entry-level luxury home buyer. Overall, from July 1 – December 31, top-tier condominium sales over $1 million decreased by 36% year-over-year. During this time, five $4 million-plus condominium sales were recorded, down from six sold in the last half of 2021. According to Sotheby’s International Realty Québec experts, the completion of new construction and pre-construction luxury condominiums over the next three years will add a consequential volume of inventory to the market, with the potential of impacting prices; however, the city’s most prestigious condominium brands and addresses are expected to continue to attract steady local and international demand.

Montreal’s luxury attached home market saw sales recede in 2022 as vanishing inventory limited prospective transactions. Overall, attached home sales over $1 million saw a year-over-year decrease of 23% in 2022, with 445 properties sold. Of these $1 million-plus transactions, one did so in the $4 million-plus price bracket, down from two properties sold above this price point in 2021. In the second half of the year, top-tier attached home sales over $1 million decreased 41% year-over-year to 139 properties sold. There were no sales over $4 million during this time, compared to two properties sold in the same period of 2021.

Montreal’s top-tier single family home market saw the beginnings of a shift toward a buyers’ market in 2022. Overall, top-tier single family home sales over $1 million decreased 22% year-over-year to 615 properties sold. The luxury $4 million-plus single family home market, however, saw a less pronounced decline indicating steadier demand for premier luxury properties. The city saw 28 total transactions in this price bracket, a decrease of 13% from 2021 levels.

In the second half of 2022, between July 1 – December 31, single family home sales over $1 million were down 38% to 223 properties sold. Luxury single family home sales over $4 million posted a moderate decrease of 26% year-over-year, with 14 properties sold between July 1 – December 31. No homes were sold over $10 million on MLS, compared to one transaction recorded in the second half of 2021.

Despite recent headwinds, Montreal’s luxury real estate market is well-established on the national and global stage as a desirable location to live, work and study. In welcoming 12.2% of new Canadian immigrants in 2021, the metropolitan area also remains the second highest destination for new immigrants to Canada, and with them, new demand for conventional and luxury housing. With sound underlying market fundamentals, Sotheby’s International Realty Canada experts anticipate that the city’s market will remain balanced into the initial months of 2023, enabling both buyers and sellers to strategically pursue opportunities.

 source: vancouversun.com

New protection meant to give purchasers more time to arrange financing or home inspections

British Columbia has become the first province to require a three-day cooling-off period for buyers after they've signed an agreement to purchase a home.

The government said the new homebuyer protection period is designed to give purchasers more time to arrange financing or home inspections after a deal has been accepted — details that were neglected in past sizzling housing markets, it said in a statement.

The extra days would also give buyers more time to consider if the purchase is right for them, amid high-pressure sales or as interest rates climb.

Tsur Somerville, a professor at the University of British Columbia's Sauder School of Business, said the change, which took effect on Tuesday, is targeting a concern that isn't a problem in the current cooler market.

The B.C. Real Estate Association reported 4,512 residential sales in November, a drop of more than 50 per cent from the year before. The average home price in B.C. in December 2021 was $984,000, compared with $904,000 in November 2022.

Somerville said sellers no longer have dozens of buyers willing to give up protections like home inspections to push their bid to the top, the way they did when the plan was unveiled in 2021.

He said having the protection in place is important for the next time the market heats up, but the situation should be monitored for a potential power imbalance that could disadvantage sellers.

"We're going to get back into times when the market is very much a seller's market. These things are cyclical,'' he said.

"So I think it's important to have in place, but I think it's also important to monitor it and see what's going on.''

Trevor Koot, CEO of the B.C. Real Estate Association, said the new rules were not what was needed when they were announced in 2021 and will have no impact in the current market.

"Every transaction now has conditions on it, and home inspections, and appraisals, and we're back to a balanced market where buyers can come in and be rational and be reasonable,'' he said.

Even in a hot market, a three-day wait period is not enough to make a difference, since it takes much longer than that to get access to home inspections and other supports, he added.

In 2021, the association made 34 recommendations to the government, including a five-day mandatory listing period for properties to prevent bully offers.

"Instead of giving the buyer three days after, this gave every party that was interested in a property, including the seller, that five days to be fair and reasonable,'' Koot said.

"And it gave the gift of time to everybody, not just the one side.''

The province says buyers who back out of a sale within the three-day period will be hit with a cancellation fee of $250 for every $100,000 of a home's purchase price, to ensure transactions are taken seriously.

In a statement, Finance Minister Katrine Conroy said the measures will protect buyers and strengthen public confidence in the real estate market.

A federal ban on foreigners buying residential real estate is set to go into effect in January.

But local real estate agents and pundits say they’re still in the dark about exactly how the ban will work and what it will mean to the real estate market on the North Shore.

Since last spring, when Ottawa first announced its intention to ban foreign buyers, “it’s been under the radar,” said Jason Soprovich, a West Vancouver real estate agent who specializes in luxury homes.

“We’ve been told that it’s coming into effect, and that it’s going to affect personal purchases of international buyers across the entire country, and that there will be a moratorium for two years, and that it will affect corporations being able to purchase as well.”

What’s less clear is what the impact will be, he said.

Impact of foreign buying ban unclear

The federal government introduced the new rules among efforts to dampen housing prices.

But Andy Yan, director of SFU’s city program, said that move has come about a decade too late. Between 2011 and 2016, foreigner buyers played an outsize role in some real estate markets, notably including West Vancouver, which became popular with affluent purchasers from China.

At that time, loose lending rules governing foreigners meant it was often easier to get a loan as a foreign student with assets than it was as a Canadian seeking a mortgage, said Yan.

The result was many foreigners were happy to use local real estate as an investment, he said.

Resulting rising prices are “what happens when residential property becomes a global commodity,” said Yan.

Going back to 2016, foreign buyers made up 24 per cent of West Vancouver real estate purchasers in the weeks leading up to the introduction of the provincial foreign buyers tax.

But once that tax was put in place in 2016, foreigners have made up a much smaller percentage of purchasers, said Soprovich.

During pandemic number of foreign buyers fell

As COVID-19 closed borders in 2020 and 2021, foreigners largely disappeared from real estate sales, he said. The real estate boom of last year was fuelled entirely by domestic buyers, said Soprovich.

Yan said foreigners haven’t been dissuaded entirely from buying local real estate. In fact, he said he wouldn’t be surprised to see a spike before the ban officially goes into place.

He added the two-year moratorium is a temporary measure and may be intended more for political appearances than to accomplish policy goals.

About nine per cent of West Van homes foreign owned

According to figures from the Ministry of Finance, about nine per cent of homes in West Vancouver have some kind of foreign ownership. In the District of North Vancouver, that percentage was lower – at about three per cent. In the City of North Vancouver, foreigners account for about five per cent of residential property owners.

Foreigners also pay about 60 per cent of the speculation and vacancy tax.

In West Vancouver, the amount paid – $6.58 million – is the third highest in the province.