It was tough at the top for people who sold their luxury homes in Vancouver last year.
Overall, sales within the luxury market grew from 4,282 in 2016 to 4,515 units in 2017, according to Sotheby’s International Realty Canada’s 2017 Year-End Top-Tier Real Estate Report.
But when you break those sales down into three price segments, the most expensive of them saw the biggest drop in any major Canadian city that the report covered.
WATCH: In this map, Metro Vancouver turns red with $1-million single-family homes
In its report, Sotheby’s broke luxury home sales into three segments:
- Homes that sold for between $1 million and $2 million
- Properties that cost between $2 million and $4 million
- Units that cost $4 million or more
Out of all three, sales of Vancouver homes that cost $4 million or more fell by 33 per cent, steeper than either of the other two price segments in Vancouver, and more sharply than homes worth $4 million or more in Calgary, Toronto and Montreal.
The total number of sales in this category — including condos and townhouses — fell from 573 in 2016 to 382 in 2017, marking their lowest level in three years.
The number of sales of single-family homes priced at $4 million or more also tumbled, dropping from 520 in 2016 to 336 in 2017, a drop of 35 per cent.
This chart illustrates the trend:
The report blamed the decline on a “disconnect between buyers and sellers, as the latter delayed hope of more attractive offers, and buyers waited for market conditions to settle.”
The trend was “not shocking, but surprising” for Brad Henderson, president of Sotheby’s International Realty Canada.
He said there’s a “stalemate” going on, “particularly in the higher end of the market.”
“I think there’s a fear of heights, and that the Vancouver prices have gotten to a point where many in the market are concerned that there isn’t necessarily the bandwidth for it to be able to continue going higher,” Henderson said.
He noted that a number of factors are affecting real estate on the West Coast: concerns about affordability, policy changes such as the foreign buyers tax enacted by the provincial government, as well as mortgage rule changes ushered in by the feds.
“All of those things individually are headwinds to the marketplace,” Henderson said. “But collectively, everyone is waiting to see how it’s all going to play out.”
But sales aren’t the only market metric that have changed.
The Sotheby’s report also showed that luxury homes are generally spending more days on the market before they sell.
In the first half of 2016, homes selling for $4 million or more spent an average of 37 days on market. In the second half, they spent an average of 49 days on market.
That grew further in 2017: in the first half of last year, they spent an average of 51 days on market, and 61 days in the second half.
Henderson said 2016 doesn’t make for a good comparison year because the market was “quite buoyant” at the time, and that that didn’t change until the provincial government implemented the foreign buyers tax in August of that year.
“I think the government intervention started to change the psychology” of the market and that it started to “rock the confidence of the consumer,” he said.
As the market has recovered from the tax, plenty of activity has been concentrated in the market for condos worth anywhere between $1 million and $4 million.
“Not only come back but surpassed higher levels,” Henderson said. “And the reason for that is it’s a more affordable option compared to a single-family home.”
Condos have also become the “form of choice” for a wider audience of buyers, such as young urban professionals, “move-up buyers” who want to enter larger homes, empty nesters and others looking to downsize.
That insight is consistent with findings by Royal LePage, which called 2017 the “year of the condo” in a report issued Wednesday.
Royal LePage found that the median price of a condominium in Greater Vancouver surged by 20.2 per cent year-over-year to $651,885 in the fourth quarter of 2017. Meanwhile, the price of a bungalow only grew by 5.3 per cent in the same time frame.
Henderson was asked whether the “stalemate” in luxury home buying means that prices have reached their upper limits in Vancouver.
He responded that B.C. remains an attractive place for people to move to, and that there are many factors that could keep the market healthy.
Those included a strong economy, and the fact that B.C. is not just attracting foreign buyers, but people from across the country.
In any case, he saw more “normal” conditions prevailing, in contrast to bidding wars for single-family homes that have been seen in previous years.
“It’s quite tame, what we think is it’s more balanced and more normal right now,” Henderson said.