After a bearish 2022, developers and brokers in the Greater Toronto Area (GTA) luxury real estate market point to factors such as the stabilization of interest rates, pent-up demand and the return of snowbirds as indicators that things are loosening up.
Jana Korim, who is in charge of sales for North Drive Investments’ 36 Birch project in Toronto’s Summerhill neighbourhood, says turnout was “beyond expectation” at a recent Open Doors weekend event at three of the newly completed condo townhouse suites.
“It was refreshing to see so many buyers who stayed home during the winter getting a jump on the spring market, actively shopping their options this early,” she says. “We can expect the luxury segment to enjoy a strong and swift spring market this year.”
Signs of renewed activity are apparent throughout the GTA. Last year saw downward pricing pressure due to lingering consumer uncertainty, higher borrowing costs, a “misdirected and confusing” foreign buyers ban and a more empowered homebuyer position, says Don Kottick, president and chief executive officer of Sotheby’s International Realty Canada.
However, the real estate market absorbed the interest rate shocks, with sellers adapting their pricing expectations to new realities, new listings coming to market, and buyers being more willing to resume their home search, Kottick says.
“With more property listings to select from and calmer market conditions that are more favourable to the home buyer, we expect that those who may have been hesitant to transact in the latter half of 2022 will return to the market, and that we will see steady activity in the GTA’s luxury market in the coming months,” Kottick says.
Michael Kalles, president of Harvey Kalles Real Estates Ltd., is seeing the same signs.
Over a recent three-month period, there were more than 670,000 viewings of Harvey Kalles listings on realtor.ca alone. Showings of Harvey Kalles Real Estate listings have quintupled since late 2022. Kalles says he is starting to see more examples of buyers competing for available properties.
“Two of our homes had been on the market for a period of time, but the moment an offer was registered, other buyers came off the sidelines and added upwards pressure to the selling price,” he says.
“Another recent sale was an exclusive listing in Forest Hill, listed at over $16-million. We sold it in less than a week, also in a multiple-buyer situation.”
“As we head into spring and summer, I expect to see an increase in listings, which is typical for this time of year. By no means will it address the supply-side challenges our region is facing, but with some more selection available and no anticipated rate hikes in the near-term, we should see an increase in activity, with more buyers engaging in the market,” Kalles says.
Rafal Starmach, director of real estate services at home.ca, says that the website has seen a notable surge in searches for properties, with a 22-per-cent increase over a recent four-week period, compared to the previous year, suggesting that there are buyers previously waiting on the sidelines now actively searching for properties. They also report a 37-per-cent increase in the amount of time people spend looking at listings.
“A good percentage of luxury homes ranging from $1-million to $1.5-million in the city of Toronto are holding offer dates, and we are starting to see multiple offer situations,” Starmach says.
“Our recent data shows that luxury properties in downtown Toronto are selling above the asking price, while properties in nearby cities are selling at or around the asking price.”
The Toronto Regional Real Estate Board (TRREB) says there was a 44.6-per-cent drop in sales in January compared with January 2022, a 3.7-per-cent drop in new listings and a 16.4-per-cent decrease in average price. Of the 3,100 properties that sold in January, 163 of those were over $2-million.
According to a Sotheby’s study released in January, luxury housing supply in the GTA faded in the last half of 2022, contributing to an annual decline of 24 per cent in residential sales (condominiums, attached and single-family homes) over $4-million, while sales over $10-million declined 29 per cent compared with 2021 levels.
Overall, residential sales over $1-million saw an annual decline of 28 per cent.
So the data indicates there’s nowhere to go but up. The Sotheby’s study concludes that this is largely because, despite all the negativity, consumer and industry confidence in the long-term fundamentals and performance of the local housing market remains. Measured against the ultrahot market that emerged from the pandemic following 2021 (which, according to Sotheby’s, was a year that saw GTA luxury residential real estate sales over $4-million soar 224 per cent year-over-year), 2022 was more about a market coming into balance, with green shoots of growth starting to emerge again for spring and summer. How robust will that growth be? Most experts indicate that it’s still too soon to tell.
Kalles says when you look at the MLS Home Price Index, to get a read on changes in property values, the 416 area code has over the past 12 months outperformed the full TREBB region, which covers the regions of Halton, Peel, York and Durham in addition to Toronto. The C03 district (which includes the neighbourhood of Forest Hill) and the C12 district (which includes the Bridle Path and St. Andrews neighbourhoods) have outperformed the City of Toronto.
“I foresee interest picking up from buyers wanting to acquire luxurious real estate,” says Alexandru Bejinariu, a broker with Re/Max Regal Homes.
“Most agree that rates are stabilizing now and future price drops are unlikely to occur. I expect to see heightened competition between the big banks for consumers’ business and slight rate reductions in light of this occurring as soon as March of this year.”
There has been a big increase in demand for luxury rentals in Toronto post-pandemic, as locals begin returning to live and work in the city, and as students, expats and new permanent residents arrive from abroad.
According to Sotheby’s, competition for rental properties has led to bidding wars and price jumps of 15 per cent to 20 per cent over the past year.
“We expect this trend to continue and anticipate that rising rental rates will incentivize some prospective renters to consider buying a luxury property instead,” Kottick says.
Newer, amenity-rich, mid-town developments such as 2Fifteen, a luxury rental building steps from the quaint restaurants and boutique shops of Yonge and St. Clair, are already reaching a price point of more than $5 per square foot.
“With the ongoing housing supply challenge, I believe demand for rentals in Toronto will remain strong,” Kalles says.
The company behind 2Fifteen says its purpose-built project sets a new standard for luxury rentals in the city, with amenities such as an outdoor dining terrace with barbecues, 24-hour concierge, fireplace lobby lounge, games room, private dining room, rooftop terrace with firepits, and men’s and women’s spas with saunas. Of the 177 suites ranging from 583 square feet to 2,151 square feet, 45 per cent have been rented.
“We definitely got some inspiration from some buildings in New York City that we visited along the way prior to construction,” says Bryan Levy, chief executive officer of DBS Developments.
“Our mission was to basically create a product that would finally be good enough that somebody would consider selling their house and moving into a building like this without sacrificing the quality on design, because up until now I would argue that luxury rentals in Toronto weren’t really luxury rentals. There are luxury buildings, beautiful buildings, but this is a different echelon.”
Levy says 2Fifteen is ideal for people who don’t want to deal with the down payment and carrying costs that come with buying real estate.
“We’re seeing more people who were on the fence, between buying a condo and getting a rental, even more than ever because of the economics of the situation – down payment versus first and last month’s rent,” says Levy.
“It’s really a niche of the market that Toronto will see a lot more product coming up that will tackle this need, where you don’t want the obligations of ownership, you want the ability to lock your door and go travel, and enjoy your lifestyle. We are the first of what I think will be a trend.”