Market Commentary by Barry Cohen

Buyers returned to the GTA’s luxury markets in the second quarter and summer, sparking an uptick in sales over multiple price points including the uber-luxe segment

Strong demand, lots of showings, an upswing in sales and a bit of caution. That, in a nutshell, has characterized the past several months of homebuying activity at the top end of the market.

After a tepid start to the year, the luxury market came alive in April and has maintained a relatively steady pace through to the end of July. Sales over $3 million have climbed more than seven per cent since April, with more than 660 freehold and condominium properties changing hands, compared to year-ago levels for the same period. Uber-luxe sales over $7.5 million have increased similarly between April and July, with sales up more than four per cent over year-ago levels.

Yes, year-to-date sales are down from 2022’s heady pace, with sales over the $2 million price point declining 36 per cent to 4,797 units. Yet, recent performance shows that there is a light at the end of tunnel. Several bright spots have emerged in our analysis of freehold sales in individual neighbourhoods, including a year-to-date increase in the number of homes sold at $2 million plus in Humewood-Cedarvale (15.8 per cent); a 6.3 per cent uptick in Forest Hill North; a close to 16 per cent jump at the $3 million price point in Bedford Park-Nortown; and a bump in homebuying activity over the $5 million and $7.5 million price points in RosedaleMoore Park between January and July, compared to year-ago levels for the same period.

Luxury condominium sales across the GTA have been particularly strong in the first seven months of the year, an increase at both the $2 million and $5 million plus price points, rising 4.3 per cent and 57.1 per cent respectively.

Cautious optimism has set in, with some buyers believing that the worst is likely is behind us. Those with rate holds have been active throughout the summer months, and the trend is likely to continue as their window of opportunity draws to a close. Step-up buyers, those moving from condominium apartments or towns, continue to make their moves to semi-detached or detached homes in the $2 million to $3 million range. While activity has dwindled in recent weeks – typical for this time of the year for families with children – the market is poised to resume its steady pace in September as pent-up demand builds and sticker shock subsides.

Supply remains the greatest challenge, particularly in the central core of the city. Few properties are listed for sale at present, and while inventory is expected to improve come September, average prices remain strong, with at least five neighbourhoods reporting year-over-year increases over the $2 million price point, including Casa Loma, Bedford Park-Nortown, Lawrence Park North, Rosedale-Moore Park, and Banbury-Don Mills.

With both the $2 million to $3 million price point and uber-luxe over $7.5 million experiencing upward momentum, the missing middle is expected to materialize in the second half of the year as the ripple effect takes hold. Moveup buyers, encouraged by lower overall housing values, should venture back into the GTA housing market the coming months, bolstering homebuying activity for the remainder of the year.

From an economic perspective, performance remains relatively sound considering the high interest rate environment. GDP growth was strong out of the gate in the first quarter, up by 0.8 per cent, which translates into 3.1 per cent on an annual basis. The Canadian economy has since slowed in response to the Bank of Canada’s continuing commitment to quantitative tightening, especially after the two back-to-back increases of .25 basis points brought the overnight interest rate to 5 per cent. Immigration is expected to continue to contribute to economic growth for the remainder of the year, but gains are likely to be offset by declines in other sectors.

While on the printing press, we learned that the Bank of Canada has chosen to pause interest rate hikes, which will be welcomed by buyers. Unfortunately, we also learned that the Toronto City Council approved increases to the municipal land transfer tax on sales over $3,000,000 in 2024. As a result, the fall market is expected to be exceptionally active in the core, with strong demand and limited supply placing upward pressure on housing values. Much of the activity will be influenced by an increase in buyer confidence, in large part due to the interest rate pause, while the remainder will be driven by buyers who are trying to pre-emptively avoid the higher municipal land transfer tax effective in the new year. Next year, however, will be less robust, with a significant decline in homebuying activity in the high-end market in 2024 as people adjust to the new tax rate.

With so many mixed signals, the knowledge and expertise of an experienced real estate professional can go a long way in helping buyers and sellers navigate current housing market conditions. Whether you’re considering listing your home for sale or would like to move-up or downsize to a new home, my team is ready, willing and able to help. We’re never too busy to talk real estate.

All the best,

Barry Cohen