One in Four Real Estate Advisors Believe that 25 Per Cent or More of Luxury Properties Are Purchased by Foreign Buyers

Royal LePage: Luxury neighbourhoods in Canada’s largest markets show significant price appreciation over last 10 years

TORONTO, May 12, 2016 – Canada’s luxury residential real estate market has seen a notable increase in foreign buyer[1] activity over the last ten years, according to a survey of real estate advisors released today in the Royal LePage Carriage Trade Luxury Properties Report.

When asked about activity over the last decade, 66 per cent of real estate advisors believe foreign buyer activity increased in their region since 2005. Almost a quarter (24 per cent) of advisors surveyed believe that 25 per cent or more of luxury properties in their area are purchased by foreign buyers. Over half of the advisors polled (51 per cent) cited China as the primary international region generating real estate purchases in Canada. Looking forward, 60 per cent of advisors anticipate increased foreign buyer activity in their region this year.

“While the impact of foreign buying on Canada’s overall residential real estate market is small, we see it growing in importance in the luxury market,” said Phil Soper, president and chief executive officer, Royal LePage.  “Canada’s stable political and financial systems, along with a tradition of cultural tolerance and openness to immigration and diversity, make our country an ideal destination for wealthy international purchasers looking to invest in real property.  Recently, a lower Canadian dollar has made this proposition even more attractive.”

The survey also explored trends in luxury real estate sales volumes.  According to the report, 67 per cent of real estate advisors stated that luxury property sales activity has increased since January 2015. Current activity is in line with the long-term trend, as the survey also found that 80 per cent of advisors surveyed stated that activity in this category has increased since 2005.

“Despite economic volatility, Canada’s luxury real estate market is healthy and active,” continued Soper. “In times of uncertainty, we can see potential home sellers sitting on the sidelines, and as a result available inventory is constrained. That is not the case in today’s luxury market.”

The survey found that the majority (84 per cent) of advisors believe that luxury properties are used as primary residences, with almost all (97 per cent) characterizing buyers as couples, and a majority (66 per cent) maintaining that luxury buyers have children living at home. In line with use as a primary residence, 74 per cent cited “detached home” as the most desirable luxury property type. The most commonly cited feature that buyers look for was “popular neighbourhood” (53 per cent), followed by “size of house” (42 per cent).

“Downsizing” was the most common reason cited for sellers listing their luxury properties (selected as the number one reason by 66 per cent of advisors). In a related finding, survey respondents said the most common age range of sellers was 55 to 64 (53 per cent), while the most common age range of primary decision makers looking to purchase a luxury property was 45 to 54.

“Real estate ownership can satisfy both housing needs and investing goals,” said Soper. “While market conditions and economic outlooks matter, we have found that luxury property ownership is predominantly driven by the desire to create a happy family home.”

“In our country’s largest housing markets, conditions have made the jump to luxury easier,” added Soper. “Average house prices in the standard category have appreciated at a faster rate than those in the luxury category, narrowing the gap and making higher-priced homes more accessible.”

The Royal LePage Carriage Trade Luxury Properties Report also outlined regional trends, as Canada comprises a number of different markets, each with its own set of economic and demographic drivers.

 

Regional Market Summaries

In British Columbia, 83 per cent of real estate advisors surveyed believe that luxury property sales activity has increased since January 2015 and 76 per cent believe activity will continue to increase over the remainder of 2016. Seventy-nine per cent of advisors polled say foreign buying activity has increased since January 2015, with buyers from China dominating these purchases (95 per cent of advisors selected China as one of the top three countries from which buyers originate).

“We believe international interest is a significant factor driving price increases in the area, as foreign buyers view Vancouver as a ‘dream-city’, as it is so beautiful. When visiting the region, they instantly fall in love,” said Jason Soprovich, real estate agent, Royal LePage Sussex. “The typical luxury property buyers in Vancouver are affluent, business-oriented and well-educated couples, and the region will always be one of the most sought-after in the world.”

The housing market in Alberta is currently depressed, with low oil prices leading to increased unemployment and decreased consumer confidence. Of the real estate advisors surveyed in the province, 60 per cent believe luxury property sales activity has decreased since January 2015, and 64 per cent believe that it will continue to decrease over the remainder of the year. With that said, Calgary has seen a healthy increase in the average price of a luxury property over the past ten years, appreciating 61 per cent from 2005 to 2015.

“Unit sales in the luxury category have dropped slightly from last year’s level,” said John Hripko, real estate agent, Royal LePage Benchmark. “Recently however, oil prices have inched higher, giving some agents and homeowners a renewed sense of optimism, causing inquiries for luxury properties in the $1 million to $2 million range to pick up. Demand for luxury properties above that price range has been slower, but consistent with the pace seen in 2015.”

The luxury residential real estate market in Ontario is strong, with increases in prices driven in part by an extreme lack of inventory in the region. Real estate advisors have seen a long-term trend in sales activity, with 76 per cent of advisors saying that they have seen increased activity since January 2015, and 88 per cent saying that they have seen increased activity since 2005. Sixty-nine per cent of advisors surveyed said that there has been an increase in foreign buyer activity over the same 10-year period, and the top three most commonly cited factors motivating foreign buyers to buy in Ontario were: (1) a stable real estate market; (2) a stable financial system; and (3) a stable political system.

The look of luxury real estate has changed due to overall price appreciation,” said Cailey Heaps Estrin, sales representative, Royal LePage Real Estate Services Ltd., Heaps Estrin Team. “Ten years ago, a $2 million house in the Toronto market sounded expensive but is now much more common. Toronto’s typical luxury property purchaser can be described as a successful local buyer looking to upsize and secure a new family home or an international buyer who wants to enter the Toronto market. In most cases, these residences are bought for the lifestyle they represent with the financial investment aspect being a secondary concern.”

The luxury market in Quebec remains relatively healthy, with 39 per cent of real estate advisors surveyed saying that sales activity in this category increased since January of last year, and over half (54 per cent) feeling that it has increased over the last decade. When asked about foreign buyer activity in their area, 58 per cent of real estate advisors believe that less than 10 per cent of luxury real estate purchases in the province are made by foreign buyers.

“In comparison to the rest of the province, the luxury real estate segment in the Montreal region has been particularly healthy over the past ten years, with performance in 2015 having been especially strong.  The Quebec economy, along with consumer confidence, is showing signs of noticeable improvement and is by extension fostering increased interest and activity in the Montreal real estate market,” said Marie-Yvonne Paint, real estate professional Royal LePage Heritage. “Amongst these transactions, prestigious homes remain most popular with local buyers, with a small proportion of these purchases being attributable to foreign buyers. In the luxury apartment segment, the proportion of purchases made by foreign buyers is slightly higher.”

 

Regional Market Data  

The following chart provides price[2]  and attribute comparisons between areas that met Royal LePage Carriage Trade Luxury Properties requirements[3] in 2005 and 2015 in the four regions studied.  The data shows significant price appreciation in Canada’s luxury neighbourhoods across all four regions. The Greater Vancouver luxury property market leads the country with a ten-year price increase of 125 per cent across Carriage Trade Luxury Properties designated areas, followed by the Greater Toronto Area (69 per cent), Calgary (61 per cent) and the Greater Montreal Area (58 per cent).

Region	Year	Beds	Baths	Living Area (Sq.Ft.)	Lot Size (Sq.Ft.)	Year Built	Average Value ($)	% Increase 2005/2015
Greater Vancouver	2005	3.4	2.7	3,140	15,517	1979	2,658,236	125%
Greater Vancouver	2015	3.6	2.8	3,122	14,388	1974	5,987,945
Calgary	2005	3.0	2.3	2,356	8,429	1974	1,438,728	61%
Calgary	2015	3.0	2.4	2,453	8,372	1969	2,317,617
Greater Toronto Area	2005	4.0	3.1	3,119	11,888	1960	2,022,943	69%
Greater Toronto Area	2015	4.0	3.1	3,204	11,790	1962	3,423,867
Greater Montreal Area	2005	4.0	2.5	3,054	8,058	1955	1,318,707	58%
Greater Montreal Area	2015	4.0	2.5	3,078	7,623	1956	2,088,998

 

Sample Neighbourhood Price & Attribute Comparison

The following charts provide sample neighbourhood price and attribute comparisons between Royal LePage Carriage Trade Luxury Properties designated micro neighbourhoods in 2005 and 2015 in the four regions studied.  The Greater Vancouver neighbourhoods of Point Grey and West Vancouver lead this group with a ten-year price increase of 135 per cent, respectively, followed by the Greater Toronto Area neighbourhoods of Lawrence West and Rosedale (76 per cent and 65 per cent increases, respectively). The neighbourhoods of Outremont and Westmount in the Greater Montreal Area showed healthy price appreciation with a ten-year price increase of 64 per cent and 51 per cent, respectively, as did Calgary’s Elbow Park and Mount Royal, which saw increases of 54 per cent and 27 per cent, respectively.

Region	Neighbourhood	Year	Beds	Baths	Living Area (Sq.Ft.)	Lot Size (Sq.Ft.)	Year Built	Average Value ($)	% Increase 2005/2015
Greater Vancouver	Point Grey	2005	3.2	2.5	2,511	11,468	1972	3,414,628	135%
Greater Vancouver	Point Grey	2015	3.2	2.5	2,511	11,468	1972	8,008,455
Greater Vancouver	West Vancouver	2005	3.4	2.7	3,380	17,324	1982	2,605,566	135%
Greater Vancouver	West Vancouver	2015	3.5	2.8	3,546	18,892	1982	6,112,387
Calgary	Elbow Park	2005	3.1	2.3	2,220	6,793	1967	1,424,532	54%
Calgary	Elbow Park	2015	3.1	2.3	2,220	6,793	1967	2,190,898
Calgary	Mount Royal	2005	3.2	2.5	2,918	9,828	1958	2,210,027	27%
Calgary	Mount Royal	2015	3.2	2.5	2,918	9,828	1958	2,806,519
GTA	Lawrence West	2005	4	2.5	2,945	10,618	1963	1,976,508	76%
GTA	Lawrence West	2015	4.1	2.5	2,953	10,406	1960	3,472,589
GTA	Rosedale	2005	4.3	2.8	3,206	6,344	1921	2,099,604	65%
GTA	Rosedale	2015	4.4	2.9	3,284	6,549	1921	3,456,598
GMA	Outremont	2005	4.0	2.3	2,891	5,728	1930	1,089,248	64%
GMA	Outremont	2015	4.0	2.4	2,946	5,782	1927	1,787,840
GMA	Westmount	2005	4.3	2.8	3,449	6,298	1933	1,819,127	51%
GMA	Westmount	2015	4.3	2.8	3,449	6,298	1933	2,751,418

 

For a copy of the full Royal LePage Carriage Trade Luxury Properties Report, click here.

 

Survey Methodology

The Royal LePage Carriage Trade Luxury Properties Report polled 250 real estate advisors, specializing in luxury properties across Canada, between February 26 and March 9, 2016.  Each respondent was asked to complete a survey composed of 31 questions spanning a variety of topics including regional luxury market trends, buyer/seller demographics, foreign buyer activity and unit sales.  Separate interviews were conducted with regional luxury real estate professionals to validate the survey findings and acquire additional insight on the market’s overall drivers and performance.

For the survey, luxury properties are defined as those which cost no less than four times the average home price in the Greater Toronto Area, Greater Vancouver, Greater Montreal Area and Calgary markets. 

Royal LePage announces partnership with LuxuryRealEstate.com

Royal LePage has partnered with Who’s Who in Luxury Real Estate, a global network of the finest luxury real estate professionals featuring over 60,000 luxury properties on their award winning website, LuxuryRealEstate.com.  With visitors from over 200 countries, this partnership will enable Royal LePage real estate professionals to maintain a global presence for their Royal LePage Carriage Trade luxury listings and offer unprecedented listing exposure for their clients. 

About Royal LePage

Serving Canadians since 1913, Royal LePage is the country’s leading provider of services to real estate brokerages, with a network of over 16,000 real estate professionals in more than 600 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage Shelter Foundation, dedicated to supporting women’s and children’s shelters and educational programs aimed at ending domestic violence. Royal LePage is a Brookfield Real Estate Services Inc. company, a TSX-listed corporation trading under the symbol TSX:BRE.

For more information visit: www.royallepage.ca.

 

For further information, please contact: 

Michael Jesus
Kaiser Lachance Communications
647.783.1807
michael.jesus@kaiserlachance.com

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[1] For the purposes of the Report, “foreign buyers” are defined as buyers who live outside of Canada all, or most of the time.

[2] Pricing data is provided by Brookfield RPS and constitutes average price values for single-family homes in Royal LePage Carriage Trade areas/neighbourhoods.  Note: There may be individual homes in Carriage Trade areas/neighbourhoods that do not meet the requirements and homes outside of Carriage Trade areas that do meet the requirements.

[3] To qualify as a Royal LePage Carriage Trade area, the area needs to have an average home price at least four times higher than the average home price in the given city (“average home price”).