State of Luxury Real Estate in Canada

The Sotheby’s International Realty 2024 Fall State of Luxury Report highlights a stabilizing Canadian luxury market, supported by rising inventory, easing interest rates, and steady demand. In Toronto and Vancouver, luxury condo markets are shifting towards buyers, with prices stabilizing as inventory outpaces demand. Meanwhile, Montreal and Calgary are seeing notable strength, driven by local market dynamics. According to Sotheby’s CEO Don Kottick, buyers now have some of the best purchasing conditions in recent years, though rising building costs and policy hurdles could limit new supply.

Toronto: Luxury condo sales remain steady, with inventory up by 11% compared to last year. This has led to a more balanced market, where buyers have room to negotiate, especially in properties priced above $4 million.

Vancouver: Luxury listings have increased by 9%, creating balanced conditions similar to Toronto. Properties priced at $5 million and above are seeing longer time-on-market, reflecting cautious buyer behavior.

Montreal: Strong demand for high-end homes continues, with properties above $1.5 million up by 8% in sales, highlighting consistent interest despite a slowing broader market.

Calgary: The luxury sector remains robust, driven by local and interprovincial buyers. Properties over $1 million saw a 10% year-over-year increase, fueled by economic stability and affordability compared to other major cities.

Source: Sotheby's International Realty Canada

OUR TAKE

Based on the data, we anticipate a steady and potentially favourable outlook for Canada’s luxury real estate market as it heads into 2025, driven by a few key dynamics:

Balanced Market Conditions: With rising inventory levels in markets like Toronto and Vancouver, we’re seeing more buyer-friendly conditions, suggesting stable pricing. If these inventory levels hold or increase, we may see a gradual price correction or stable luxury market growth, particularly in high-priced properties.

Localized Demand Variations: Montreal and Calgary demonstrate stronger growth due to local demand factors, with Montreal’s cultural appeal and Calgary’s economic resilience attracting buyers, especially those relocating from other provinces. This trend could fuel continued growth in these cities.

Interest Rate Impact: If interest rates decrease as anticipated, we could see renewed demand in luxury properties, particularly in Toronto and Vancouver, as lower borrowing costs make high-end real estate more accessible for both local and international buyers.

Resurgence in Canadian Multifamily and Industrial Sector

The Canadian commercial real estate market, particularly in the multifamily and industrial sectors, has experienced a strong resurgence in 2024, driven by increasing investor confidence and demand stability within these asset classes.

Key Factors Driving Growth in Multifamily and Industrial Sectors

Multifamily Sector

Investor Demand: As rental demand continues to grow, multifamily properties (like apartment complexes and rental units) have attracted significant interest from investors. In Q2 2024 alone, investments in multifamily properties reached $3.5 billion, showing that investors view this sector as resilient, especially during periods of high housing costs and limited homeownership affordability.

Income Stability: Multifamily properties are seen as a stable income source, with the current market seeing more demand from renters than supply in many urban areas. This imbalance further enhances the attractiveness of multifamily investments as reliable long-term assets, particularly in cities with high immigration and population growth rates, where rental demand remains robust.

Industrial Sector

E-commerce and Logistics Demand: With the continued growth of e-commerce, there has been a substantial need for logistics and warehousing spaces, supporting high demand for industrial properties. The industrial sector saw $4.5 billion in transactions during Q2 2024, underscoring the increased demand for distribution centers and warehouses, especially near major urban centers where last-mile delivery is essential.

Supply Constraints: Industrial properties, especially warehouses, have been in limited supply, making them valuable investments. The relatively low vacancy rates in the industrial sector are a sign of constrained supply, which is driving rental rate increases and higher property valuations.

Source: Canadian Real Estate Magazine

OUR TAKE

These trends highlight how investors are increasingly focusing on asset classes that offer stability and long-term growth potential, even amid fluctuating residential real estate conditions. The multifamily and industrial sectors are well-positioned to benefit from sustained interest as they continue to adapt to changing consumer behaviours and economic conditions in Canada.

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