Skip to main content
  1. News
  2. Business & Finance
  3. Industry

The 6 Reasons Why Canadian Luxury Property Hit Records in 2014

See also

Should Luxury Market Numbers Matter to Investors?

According to REMAX's latest report, Canadian luxury house sales hit new records for demand in 2013. (here's the report: REMAX Luxury Real Estate Survey )

This has raised a number of questions about the health of markets, the affordability of certain cities and what's driving this new found demand.

Luxury sales volumes have increased: Vancouver 36%, Calgary 34%, Edmonton 32%, Hamilton-Burlington 31%, Kitchener-Waterloo 27%, Toronto 18%.

Here are some of the over-riding trends that are driving this luxury market demand

  1. Economic Confidence is very high in those of higher income and higher net worth households. This perceived stability provides them a clearer vision of whether to take the "risk" of upgrading their home/lifestyle
  2. Many higher-income/net worth families have already purchased their 'second/vacation property' located in the US or Canada during the downturn, so their next move is to upgrade their home lifestyle. This is helping to prop up the higher end market in these key cities
  3. Tremendously low mortgage Interest Rates allow higher priced homes to be more accessible (on a monthly payment basis) to a larger cohort of Canadians. Yes, this drives up underlying debt ratios.
  4. The FEAR of mortgage interest rate increases that were spread throughout the year pushed buyers into the market more quickly than underlying economics would normally dictate. So even though the Bank of Canada interest rates did not move up the expectation of it moving drove demand.
  5. Investment alternatives (savings and bonds for example) are providing higher net worth individuals with lower return, so many are turning to putting that money into their home choices.
  6. In certain cities, an influx of foreign investment seems to be focused on the higher end of the market

In addition, it is quite obvious why this is occurring in Calgary and Edmonton. Dramatic rise in population, higher than national average incomes and net worths as well as a confidence in the long term viability of the economy of the region.

Because none of the 6 factors above should change in the next year, this trend should continue. Although, because we are starting at a higher base, the percentage increases will not be as large as we witnessed in 2013.

So, all in all, The luxury market will continue to feel strong upward pressure due to the perceived recovery in economies around the world (including US and Europe), this confidence begins to open the taps of those who have been sitting in the safety position of cash or GICs.

With the Bank of Canada clearly stating they will be keeping interest rates low until 2015, the ability for an additional group of Canadians to enter the luxury market remains.

Although most investors do not focus on the luxury market for their portfolio growth, they can use it as just one indicator of market direction. They also understand that when a large number of 'luxury' properties are sold in their target market, it can artificially inflate market performance by skewing the dreaded Average Sale Price.

Awareness of the performance of the high-end of the market is important to investors, mostly to understand and interpret the stats that are released on the whole market.

For Additional Insights and Analysis into Canadian Real Estate Investing visit The REIN Research Blog here: Canadian Real Estate Insider

Advertisement

News

  • Mt. Everest avalanche
    Disaster strikes Mt. Everest as at least 12 people were killed in an avalanche
    Video
    Watch Video
  • Most Earthlike planet discovered
    The Kepler telescope has discovered the most Earthlike, possibly habitable planet yet
    Space News
  • Easter crosses create debate
    Easter crosses spark a debate of separation of church and state in Ohio
    Headlines
  • Chelsea Clinton is preggers
    Former first daughter Chelsea Clinton is pregnant with her first child
    Headlines
  • Stanley Cup playoffs
    The battle for Lord Stanley's Cup is on, don't miss a minute of playoff action
    Sports
  • Ukraine discussed amongst U.S., E.U., Russia
    The U.S., E.U. and Russia agree on ways to diffuse the tension in Ukraine
    Video
    Watch Video

User login

Log in
Sign in with your email and password. Or reset your password.
Write for us
Interested in becoming an Examiner and sharing your experience and passion? We're always looking for quality writers. Find out more about Examiner.com and apply today!