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Demand for luxury homes rises across Canada: RE/MAX


Foreign investment, increased wealth in
Metro Vancouver spurred greatest rise
 By Brian Morton, Vancouver Sun May 19, 2011  
Demand for luxury homes across Canada - especially in Metro Vancouver - is rising, with the improved financial standing of wealthy Canadians the main reason, according to a report released Wednesday by Re/Max.

But while rich foreign investors - especially from mainland China -are the major factor in snapping up the priciest Metro Vancouver properties, locals with high equity in their homes are also a part of the market.

"We're not talking about first time home buyers here," Richard Laurendeau, managing broker Vancouver-based Re/ Max Westcoast Realty, said in an interview.

"We're talking about people who have owned homes for a long time and enjoyed the equity growth. Sometimes they make the move up, which might bring them to the $2-million price point. Perhaps they want a high-end condo, where you can spend $2 million. It's a lifestyle choice. [They] can lock the door and travel the world."

According to the report, the improved financial standing among high-net-worth people is the major factor driving strong sales activity at the top end of Canada's housing markets.

The report on thriving sales of high-end homes in most markets is despite a general slowdown in the overall housing sector, according to a report by the Canadian Real Estate Association earlier this week.

But that report also said that while Canadian home sales were down in April by 14.7 per cent from a year earlier, the average price of transactions was up eight per cent, driven largely by multi-million dollar transactions in Metro Vancouver.

Re/Max examined 12 major centres and found that luxury sales have surged in close to two-thirds of housing markets between January 1 and April 30 of this year, compared to the same period in 2010.

In terms of percentage increases over the four-month period, Metro Vancouver - where foreign investment has played a major role -lead the way with a 118-per-cent increase, from 343 $2 million plus homes sold in 2010 to 747 sold in 2011.

That was followed by Ottawa (59 per cent increase), Calgary (51 per cent), Halifax-Dartmouth (27 per cent), Winnipeg (24 per cent), Hamilton-Burlington (13 per cent) and Greater Toronto (nine per cent).

Six of the seven major cities -except Calgary -are poised to set new records in top-end activity by year-end.

Price points were lower in other markets, with a luxury home in Winnipeg, for example, considered anything over $500,000.

Victoria (with a $1-million price point), the only other B.C. market surveyed, saw a 14-percent drop in sales of luxury homes, from 91 to 78.

"Greater Vancouver's luxury market continues to show unprecedented strength, with the number of sales over $2 million more than doubling in the first four months of 2011," the report said.

"Despite the robust activity, housing values in the top end of the market have climbed a nominal two per cent, rising from $2,955,168 to $3,025,947 year-over-year.

"Days on market have fallen to 48 from 54 one year ago, although some properties are moving within days in coveted neighbourhoods. . demand is strongest for properties on Vancouver's Westside (447 sales), followed by West Vancouver (160), and Richmond (41).

The report said that while foreign investment has augmented sales activity in several Canadian markets, its influence was only significant in Metro Vancouver. Most regions reported that locals were the primary drivers of demand for luxury homes.

Laurendeau said that Vancouver's $2-million price point often involved tearing down homes on $2-million properties to build new ones.

"New immigrants have an excitement for new homes [and] that adds to the surge. When you've got a newly built home [on Vancouver's west side], its value jumps well in excess of $2 million very quickly."

Laurendeau said he recalls buying his first lot in Richmond in 1986 for $40,000. "Today, it's worth $600,000. And that's where the growth in equity comes from."

He cited a woman who bought a home in Shaughnessy in the 1970s for $100,000. "Today, it's worth in excess of $2.5 million. She could say that she wants to improve her lifestyle and treat herself to something better that life has to offer, because she can. So, she's a local buyer with $2.5 million in her pocket. She could buy a newer home with all the fine finishings for $2.2 or $2.3 million. She'd still come out ahead."

Meanwhile, Elton Ash, regional executive vice-president, Re/Max of Western Canada, said the strength of the upper-end segment continues to defy expectations.

"Western Canada, in particular, will continue to see the upside benefit of investment from abroad."

The report cited several factors that position Canada as an attractive option for buying luxury homes, including that its real estate remains a bargain by international standards, given its ranking for quality of life, political and economic stability and the strength of its property laws.

"Three key factors -serious equity gains, stock market recovery, and improved economic performance -have been behind the push for luxury housing product across the country," Michael Polzler, executive vice-president, Re/ Max Ontario-Atlantic Canada, said in a statement.

Re/Max noted that the number of millionaires is rising in Canada, and that they're investing more in real estate.

© Copyright (c) The Vancouver Sun


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