Recent government regulations have created “unprecedented levels of uncertainty” for the high-end home market heading into the key spring buying season, Sotheby’s International Realty Canada said in a report released Wednesday.
Data compiled by the realtor in Canada’s four largest real estate markets predicts little deviation from ongoing trends.
Toronto is expected to continue to lead the pack in sales of homes worth over $1 million, while Vancouver’s high-end home sales will continue to normalize. Calgary’s market is forecast to continue its cautious recovery from the oil price shock and sales in Montreal are anticipated to grow modestly, according to the report.
But recent policy changes from federal, provincial and municipal governments remain “wild cards,” said Brad Henderson, president and CEO of Sotheby’s International Realty Canada.
Last fall, Ottawa introduced new rules requiring all insured mortgages to undergo stress testing to determine if borrowers would still be able to meet their mortgage obligations if interest rates climb or if their incomes decline. Such tests previously were not needed for fixed-rate mortgages longer than five years.
Also last year, the B.C. government introduced a 15 per cent tax on foreign buyers of Vancouver homes and the city of Vancouver imposed a tax on vacant homes.
“We are forecasting that we are going to continue to see the market adjust to this new reality,” Henderson said of Vancouver.
Sales of homes for over $1 million in Vancouver fell to 209 units in January and February of this year, down 27 per cent from a year ago, Sotheby’s said.
The luxury segment of the Vancouver market — defined as homes worth over $4 million — was even more dramatically affected, plunging 46 per cent from a year ago to seven units, according to the report.
Many owners of top-tier Vancouver homes who were planning to sell are now sitting on the sidelines, Henderson said.
“The individuals involved have less pressure to sell the properties, so they can afford to take a wait-and-see attitude,” Henderson said. “Arguably some of those properties would be the target of foreign buyers.”
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