U.S. election jitters lifted the Canadian luxury real estate market

Matthew Regan, broker with Re/Max Escarpment Realty, says sales perked up in October in many areas, including in cities west of Toronto, where he does much of his business. He believes uncertainty surrounding the U.S. presidential election played a role. In the weeks leading up to the Nov. 5 election, the $4-million to $7-million range suddenly became hot in the affluent city of Oakville, Ont., Mr. Regan notes. During that time, investors were pulling money out of the stock market because they were feeling jittery about the outcome, he notes. “It was fear-driven,” says  Mr. Regan, adding that some people used that capital to trade up in the real estate market. “We saw a huge uptick in the luxury segment,” says Mr. Regan. “We couldn’t keep them on the shelf.” Mr. Regan says the buyers of those properties then listed their existing home for sale, which brought out more buyers in lower-priced tranches. “You just keep working it back from there all the way to the first-time buyer,” he says. As a result of the domino effect, all price ranges in areas such as Oakville, Burlington and Hamilton, saw a rejuvenation. Mr. Regan adds that the massive transfer of wealth from the baby boom generation to their adult kids continues to play a large role. Well-off boomers are helping younger family members to move up to larger houses or better locations. Consumers across the board have also gained more confidence, he says, because the Bank of Canada has followed through on its message that the policy rate would gradually come down. Across Canada, homes sales increased 7.7 per cent in October from September on a seasonally adjusted basis, according to the Canadian Real Estate Association. In Hamilton-Burlington, seasonally adjusted October residential sales rose 4.9 per cent compared with the previous month. Compared with October, 2023, sales soared 49 per cent. Bank of Montreal senior economist Robert Kavcic characterizes last month’s performance as the national housing market finally exhibiting a pulse. Cumulative Bank of Canada rate cuts and more available inventory have aided the market’s signs of life, he adds. The economist notes that sales volumes in many markets across the country have bounced from last year’s lows, prices have stabilized in many regions and outright buyers’ markets are disappearing, based on October’s numbers. He is expecting further easing from the Bank of Canada and less stringent mortgage rules on the drawing board to support sales into 2025 – even if the acceleration isn’t as dramatic as in past cycles, he says in a note to clients. Drilling further into the data, Mr. Kavcic says market conditions continue to vary by region and segment, with Edmonton, Regina and Winnipeg all sporting strong seller’s markets. Calgary has softened somewhat, while Vancouver and Montreal remain well-balanced. In Southern Ontario, cities such as Windsor, Niagara and Guelph remain subdued compared with the rest of the country, but the supply-and-demand balance has tightened to a more balanced state. The Toronto-area market is still the toughest among Canada’s major cities, Mr.Kavcic says, because condo supply continues to saturate the market. At National Bank of Canada, economists Kyle Dahms and Alexandra Ducharme point out that housing affordability in the country posted a third consecutive improvement in the third quarter. They marked the biggest changes in Vancouver and Toronto, followed by Victoria, Hamilton, Ottawa-Gatineau, Calgary, Montreal, Winnipeg and Edmonton. Quebec City was the only place where homes became less affordable. To gauge affordability, the economists look at the mortgage payment on a benchmark home as a percentage of income.While seasonally adjusted home prices edged up in the third quarter from the second, that rise was offset by a decline in the interest rate for a five-year fixed-term mortgage and an increase in median household income in November, Mr. Regan worked with one buyer who purchased a house in a prime neighbourhood in Mississauga as an investment. Mr. Regan wondered about the buyer’s motivation because the cash flow from leasing the home won’t cover the carrying cost. But the buyer figures the current late fall market conditions will prove to be good timing if there’s a stronger rebound in 2025. The purchaser was able to negotiate a sale price of $1.74million after the property in Lorne Park was listed with an asking price of $1.85-million. “That’s a good deal for my buyer.” Mr. Regan expects the market to remain warm in the remainder of 2024, but for sellers, he recommends waiting until 2025. In the past four weeks or so, Mr. Regan has had an influx of inquiries from homeowners who are thinking about selling and wonder if they should launch their property right away amidst the renewed optimism. But unless the homeowner has an urgent need to sell, he is advising they wait until Feb. 1 or so. Listing now is risky – especially if the asking price is a little too rich. “If you’re overpriced, you’re not going to know for two to three weeks. That puts you into December and you’re at the mercy of buyers heading into the holidays.” By aiming for early February, sellers will be out ahead of many competing listings, he says, and buyers are likely to be active. His recommendation has been met with a lot of relief on the part of homeowners who now have more time to prep their house. “We’ve got 45 listings in our queue for the spring market.” New mortgage rules set to come into effect on Dec. 15 may also spark some activity in the early part of 2025, he adds. The federal government plans to lift the cap on insured mortgages to $1.5-million from the current level of $1-million. The change will mean that buyers in the $1-million to $1.5million range will be able to buy with a smaller down payment than the 20 per cent of the purchase price that is currently required. That shift, coinciding with the wealth transfer that continues unabated, will likely bring a rush of prospective new buyers to the range between $1-million and $1.5-million. “You have a good recipe for an injection into that segment,” he says. “You may not see the sprint on Dec. 16, but give it 90 days.”