Higher-end home sales in GTA tumble 55 per cent

Theglobeandmail.com
March 20, 2018
Brent Jang

Sales of properties fetching at least $1-million in the Greater Toronto Area have plunged while the Vancouver housing market girds for a slowdown following last month's B.C. budget.

The number of GTA residential properties that sold for $1-million or more in the first two months of this year -- mostly detached houses, but also including condos and townhomes -- fell to 1,498, down 55 per cent from the same period in 2017, according to Sotheby's International Realty Canada.

Brad Henderson, president of Sotheby's in Canada, said the declining sales of higher-end properties is an indicator of the broader lull in sales volume in Canada's two largest housing markets.

Last month's average price of GTA detached houses sold slumped 17.2 per cent compared with a year earlier, but Mr. Henderson said that, if there are further pricing declines, they will be modest and far from a market crash. "Unless you have a massive external shock, you're not going to see property values knocked off much from their current levels," he said in an interview.

The Conference Board of Canada said on Tuesday that the country's housing sector as a whole is headed for further cooling this year, citing factors such as higher interest rates, moderating employment growth, increased household debt and a so-called stress test imposed by Canada's banking regulator that will reduce the amount that borrowers qualify for and therefore slow demand for real estate.

Mr. Henderson pointed out that Ontario's 15-per-cent tax on foreign home buyers took effect on April 21, 2017, applying to the Greater Golden Horseshoe Region -- a sprawling land base that surrounds and includes the GTA.

"We expect that the GTA numbers are going to look dismal from an activity perspective for the first four months of 2018 because they will be compared with record highs in early 2017," he said.

Within the city of Toronto, sales volume in the $1-million-plus category slumped to 678 transactions in the first two months of this year, a 39-per-cent contraction from the same period last year.

Within the city of Vancouver, there were 510 properties that traded hands for at least $1-million in the first two months of 2018, down 6 per cent, said Sotheby's, which didn't study sales for the Vancouver region as a whole.

The number of transactions for detached houses going for at least $1-million has fallen the hardest within Vancouver's city limits, with 193 sales in the first two months of 2018, down 39 per cent from the same period last year. By contrast, the condo segment continued to rally with 232 sales in the first two months of this year, up 51 per cent from the comparable period in 2017.

Mr. Henderson envisages a relatively mild dampening effect from the provincial budget delivered on Feb. 20, when British Columbia's NDP minority government announced a variety of measures designed to reduce home prices.

The changes include what the BC NDP calls a speculation tax targeted primarily at out-of-province residents. The tax, which some industry experts describe as largely a vacancy tax on people who pay little or no B.C. income tax, will be 0.5 per cent of a property's assessed value this year and rise to 2 per cent annually, starting in 2019. The areas affected are Metro Vancouver, the Fraser Valley, regional districts in and around Victoria and Nanaimo, as well as the municipalities of Kelowna and West Kelowna.

"The policy is saying, 'People outside the province can't vote in B.C., so let's tax them.' It's a policy than favour politics more than practicality," Mr. Henderson said.

In last month's B.C. budget, the government also announced an increase to the province's annual school tax, affecting the portion of the value of a property assessed at more than $3-million. Other notable tax measures include raising the property transfer tax on the portion of a home's sales price above $3-million and hiking the foreign-buyers tax to 20 per cent from 15 per cent while also expanding that tax beyond the initial target of the Vancouver region.

Sotheby's said it has already seen a decrease in residential sales in the $3-million-plus category from Jan. 1 to March 15 this year, declining 22 per cent from the comparable period in 2017.

Sotheby's still describes its study of $1-million-plus sales as an examination into the "luxury market," although Mr. Henderson said the term is outdated.

In the closely watched market for detached houses, the price averaged $1,737,030 last month in Greater Vancouver, down 1.2 per cent from February, 2017, according to the Real Estate Board of Greater Vancouver. The GTA's average detached home price was $1,000,736 last month, a 17.2-per-cent drop from a year earlier, the Toronto Real Estate Board said.

To qualify as luxury these days, a detached house would need to be double the average price -- nearly $3.5-million in Greater Vancouver and more than $2-million in the GTA, Mr. Henderson said.