Over the course of the pandemic, Canadian luxury markets have in many ways mirrored the trends seen across the U.S.—a sudden spike in single-family home purchases, gangbusters demand for vacation homes, and cooling interest in high-rise condos in downtown urban centers.
Areas like Vancouver, normally a hub of international investment activity, have also seen a steep dropoff in transactions from foreign buyers who found themselves suddenly unable to travel and visit properties in person.
“There are virtually no foreign investors,” said Jason Soprovich, a real estate agent with Royal LePage in West Vancouver. “There are lots of inquiries, but as far as people following procedures to fly in, quarantine, then start looking, it’s very slim.”
This comes on the heels of more than two years of price drops in the Vancouver area, a response to steep new taxes on purchases by foreign buyers. The result, after the initial coronavirus shutdown in the spring, has been an increase in activity from locally based buyers, who suddenly find themselves with more breathing room in the market. (This week, the Real Estate Board of Greater Vancouver released numbers showing that while sales in the area declined between October and November, year over year, transactions have increased.)
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“Most of the foreign students that are here have gone home, immigration has dropped to record lows this year,” said Dan Scarrow, president of Macdonald Realty, an affiliate of Luxury Portfolio International, in Vancouver. “Despite all that, the market is as buoyant as it’s ever been, and prices continue to rise driven solely by locals.”
Still, there are relative deals to be found where in the recent past bidding wars or all-cash buyers may have shut local buyers out.
“The demand has shifted,” said Kevin Hardy of the Will and Kevin team at Sotheby’s International Realty in Vancouver. “If you’re a buyer in the over C$3 million (US$2.32 million) market right now, you’re in a good spot to not be competing and maybe write a lower offer which would not have been considered 12 months ago.”
In major cities across the country, tight inventory and record-low interest rates are driving transactions from largely local buyers, and while the effect of slowed foreign investor activity varies, the consensus across the board is that once travel can safely open up again, foreign buyers will be back with a vengeance.
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“My feeling is once Covid is over, we’re going to see a slingshot of activity in foreign investor rebound,” Mr. Soprovich said. “People generally want to get back to business and back to investing in places they feel are worthwhile.”
All of which means that for Canadian luxury buyers looking to make moves, this period before travel opens back up may be an opportune moment to get a foothold in markets that are poised for growth—and potentially stiff competition—in the new year.
With Students Gone and Vacation Homes Booming, Condos Offer Opportunities
Just as Aspen, Colorado, and the Hamptons in New York have boomed as luxurious pandemic safe havens stateside, areas like Whistler in British Columbia and Muskoka outside of Toronto have seen unprecedented demand from buyers looking for quarantine escapes from their city properties.
“In Muskoka, the dollar value amount our office sold doubled” from summer 2019 to summer 2020, said Michael Kalles, president of Harvey Kalles Real Estate, also an affiliate of Luxury Portfolio International, in Toronto. “For the most part, it’s local Toronto buyers.”
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And while the flip side of that isn’t exactly a drop in activity back in the city (“We’ve got price increases quarter over quarter, and the third quarter was a record in the history of Toronto,” Mr. Kalles said), there are pockets of the market that have slowed down as foreign buyers have disappeared and year-round residents have decamped to the countryside.
“University students whose parents buy them a condo from abroad—we’ve seen that market completely evaporate [in Toronto],” said Paul Maranger of Paul & Christian Associates at Sotheby’s International Realty Canada. “Buyers would do very well to buy today, because there’s softening of prices in the condo market, and when those students return and that segment of international investing comes back, we’ll see bidding wars on all condos like we did before.”
The same phenomenon holds true in Vancouver’s market, as well.
“Prices have gone down maybe 10% in the condo market, whereas the detached market is the opposite, it’s probably up 10% of 15%,” Mr. Scarrow said. “There are about 100,000 international students in Vancouver, and a lot of those students aren’t here. A lot of those investor condos, they’re more difficult to rent out, that impacts cash flow, some people have had to sell.” (Recent data from Re/Max indicates that while overall prices in Vancouver went up by 11.4% in 2020, the condo market was negatively impacted by declining demand.)
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Montreal has also seen its international student population vanish, and as a result, has seen a corresponding increase in condo inventory.
“The market has not gone down yet, but we see more inventory than we had for condos, which were a very tight market,” said Louise Rémillard of Profusion Immobilier, an affiliate of Christie’s International Real Estate in Montreal. “[As an investor] you might have to sit empty for a few months of not being able to rent it out, but the market will pick up I think next September when school starts and these units will all be snapped up again.”
Foreign Investors Poised to Make Moves in the New Year
While the luxury markets may be showing uneven strength right now, in 2021 they’re poised for a rush of demand, thanks to a perfect storm of low mortgage rates, low inventory, and heightened interest in Canada as something of an investment safe haven.
“Canada is falling on the map as having an economy that is decently resilient, and as one of the few countries that haven’t fallen flat with respect to its Covid-19 response,” said Natalka Falcomer of Chestnut Park Real Estate Limited, an affiliate of Christie’s International Real Estate in Toronto. “The stability has been shown, and the world is now looking to Canada as a place to park their money.”
Already there’s been a steady stream of activity from U.S. buyers looking for a safe haven amid a chaotic political year and Covid-19 numbers that are worsening by the day.
“We’ve seen an incredible increase of inquiries from the United States about purchasing luxury real estate,” said Will McKitka of the Will and Kevin team at Sotheby’s International Realty in Vancouver. “Those buyers are very real, and I think when travel restrictions ease up we’re going to see a real increase in foreign buyers re-entering the Vancouver market.”
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All of this adds up to a forecast for a market that’s only like to continue growing over the next several years.
“If you take all factors, it seems pretty bullish for real estate,” Mr. Scarrow said. “And we’ve seen more interest from the U.S. than we have in a long, long time. [Canada] used to be the boring place, but when there’s too much excitement around the world, boring becomes sexy.”
This influx of interest dovetails with a market that was already showing strong signs of recovery at the start of the year.
“At the beginning of the year, the perception of the public was that now’s the time to buy, and things started to turn around, then the pandemic hit,” said Faith Wilson of Faith Wilson Realty Group, a Christie’s International Realty affiliate in Vancouver. “But in May things started to turn [upward again], people were tired of waiting. We still have a fair amount of foreign money here and I think we will see a rise in the number of loftier priced properties sold over the next while.”
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