Published Tuesday, February 25, 2020 2:32PM EST
TORONTO — Luxury homes in Vancouver and Calgary keep getting cheaper — relatively speaking.
Still out of reach for most Canadians, high-end houses and apartments in both Western Canadian cities saw drops in their median prices over a recent 12-month period, according to a new report from Royal LePage. Meanwhile, markets in Toronto, Ottawa and Montreal saw modest increases.
“The last couple years have been trending in a pretty dramatic reduction of value across the board,” said Jason Soprovich, a Royal LePage Sussex realtor in Vancouver
Luxury houses dipped 6.7 per cent to under $5.4 million in the B.C. city, while condo prices decreased 4.4 per cent to just over $2.4 million. Prices in the Vancouver market in general have decreased over the last year as well, according to reports. But still, the city is one of the most expensive in the world. In January, it was ranked the second least affordable housing market on the planet in the Demographia International Housing Affordability Survey.
Luxury properties are generally considered to be three times the cost of an average home, but the figure can be four times higher in the major cities of Toronto, Montreal, Vancouver and Calgary. While the latter two cities have seen declines in luxury prices, most other markets have been on the rise. Nationally, there has been a widening gap between supply and demand — too many buyers and too few homes have pushed prices higher and higher in many regions.
For luxury homeowners in declining markets, the price drops represent large sums of wealth. Soprovich has been seeing more luxury homes sell at what he called “anomaly drops,” sale prices as much as 40 per cent under the listing price. For owners whose homes are their “largest asset base,” these drops represent a decline in wealth.
The news isn’t bad for everyone. People looking to “upsize” or move into the luxury market have a unique opportunity. “It’s an excellent time for buyers to reinvest,” said Soprovich.
In Calgary, the drops in luxury home costs were less dramatic, with houses falling just $15,000 from the previous 12-month period to $1.95 million and condos dropping 2 per cent to $887,000.
Royal LePage Benchmark realtor John Hripko considers the dip to be “negligible” in the Alberta city. He would characterize the luxury housing market to be relatively “flat” in Calgary, but economic concerns could be playing into the lack of growth. The city hasn’t seen a “seller’s market,” in which scarce supply means prices can stay high, since 2013.
“This marketplace will turn around,” he said, noting that it likely won’t see substantial improvement for a couple more years and until the city diversifies away from the energy sector. “The overall economic scenario in Alberta and Calgary has to improve dramatically.”
Until then, sellers who can’t afford to wait could be taking major losses. “When they have to suck it up, they suck it up big,” he said. Recently, he knows of a seller who bought their home for $3.7 million and sold it for $2.9 million.
In other major cities, median luxury home prices are steadily rising. Montreal saw the highest price increase year-over-year, with a jump of more than $145,000 from 2018 to 2019 (8.5 per cent). The median price in Toronto rose 1.2 per cent to just over $3.6 million, while Ottawa surged 2.7 per cent to nearly $1.85 million.
Affordable housing remains an issue for generations of Canadians. In 2019, a report from non-profit Generation Squeeze found that home prices are nearly double what millennials in Canada can afford. It now takes much longer to save for a new home, the report said. It takes the average millennial 13 years to save a 20 per cent down payment on an average priced home, while it took their parents just five years around 1976.