The luxury real estate market across Canada has fluctuated significantly in the past year. Factors like rising mortgage rates, inflation, and sparse inventory put pressure on buyers and sellers. This has brought today’s market back to more normal trends. Even with these pressures, the luxury market is expected to continue growing in the next five years. Review this home market update to understand how luxury trends have influenced present-day conditions.
Canada’s luxury market
Much of the luxury buying frenzy originated from 2021 trends. This resulted in quick acceleration for select areas. High buyer demand greatly impacted housing inventory and was most evident in the third quarter of 2022. Many luxury areas simply didn’t have the supply to meet local demand. Without adequate real estate, transactions were limited. This created a decrease in residential sales, totaling a 63% annual decline by September 2022 in the Greater Toronto Area.
Large Alberta municipalities like Calgary exhibited resilience in cooling luxury trends. This is due to the impact of elevated oil prices and inter-provincial migration. With revenue and increasing population, buyer demand wasn’t dampened in the same way as in other areas. Most markets in Alberta still experienced modest activity, although sales could never compete with the activity of 2021.
Entering the next five years, the luxury residential real estate market’s projected growth is over 10%. National average home prices have been on the rise since the beginning of 2022. This is illustrated by increasing average home prices, which were 20.6% higher in February 2022 than at the same time in 2021. These increasing trends are fueled by buyer demand. Interest in larger homes was sparked in 2021 and has persisted since then.
Large Alberta municipalities like Calgary exhibited resilience in cooling luxury trends. This is due to the impact of elevated oil prices and inter-provincial migration. With revenue and increasing population, buyer demand wasn’t dampened in the same way as in other areas. Most markets in Alberta still experienced modest activity, although sales could never compete with the activity of 2021.
Entering the next five years, the luxury residential real estate market’s projected growth is over 10%. National average home prices have been on the rise since the beginning of 2022. This is illustrated by increasing average home prices, which were 20.6% higher in February 2022 than at the same time in 2021. These increasing trends are fueled by buyer demand. Interest in larger homes was sparked in 2021 and has persisted since then.
Factors impacting trends
Several factors impacted the cooling luxury market trends that persist today. Most notably, mortgage rates rose to temper the hot market. Buyer demand quickly eliminated inventory. Other economic factors like inflation also impacted buying power. This home market update provides a clear explanation of how these factors functioned.
Mortgage rates
In the midst of rising mortgage rates, many buyers decided to wait out disadvantageous trends or search for other options. September 2022 experienced the most prominent rate hike, when the overnight target rate was at 3.25%. This was the highest rate seen since the financial crisis in 2008. Although luxury buyers may not feel the impacts of mortgage rates as significantly, they still greatly impact market trends overall.
Inflation
Inflation also took hold in 2022, affecting the luxury real estate market. By November 2022, the Consumer Price Index had risen 6.8% compared to the same time in 2021. Inflation was most evident to the general population in gas prices, which had risen 13.7% in November 2022 compared to 2021. The impacts of inflation also increased mortgage interest costs and home affordability. Increasing prices slowed the housing market, which has been cooling since May 2022.
Inventory
As buyer demand persists, inventory lacks the opportunity to replenish itself. Local demand, population gain, and house mobility put pressure on inventory levels. Demand-side policies are in place, such as bans and taxes on foreign buyers. However, these policies don’t have enough impact to help luxury buyers in Canada. Low inventory limits the number of possible transactions. It also keeps housing costs high.
Summer 2022 conditions
The summer seasonal lull in the luxury real estate market was exacerbated even more in 2022. An increase in summer travel had a significant negative impact on buyer demand in the area. This made top-tier real estate even more diminished. The lull persisted into the first weeks of fall, marking the shift in luxury buyer demand. Consumer and sales activity continues to be adjusted heading further into 2023 as decreasing sales become the trend.
Edmonton’s market statistics
Areas like Edmonton have been resilient despite the pressures on the larger luxury market. Review the statistics below for a quick understanding of 2022 trends. Then, read the rest of this home market update for a more detailed explanation.
- The number of people working was up 1.4% in November 2022
- Residential building intentions were up 20% in October 2022
- The consumer price index increased 6.4%
- The NHPI increased 6.5% in November 2022
Edmonton’s luxury market
The luxury market in Edmonton, like other Alberta cities, is supported by its economy and population growth. The number of working residents was still increasing by the end of last year. This likely made other factors like the rising consumer price index and NPHI more manageable. Even so, luxury sales in Edmonton were declining by the end of 2022, down by 40% in September.
An intriguing trend with Edmonton luxury homes is the impact of a generational shift. In the past, many homeowners decided to build luxury properties in the city. As older residents move out of the area, many of these homes are listed for sale, allowing newer luxury buyers to rebuild or renovate old properties.
The decision to buy older properties and renovate them has its own challenges. Namely, material shortages and insufficient labor have slowed new home growth. Without new homes on the market, sales will decline in 2023. Even so, residential building intentions increased by the end of last year. These conditions create a more balanced market for buyers compared to other cities in Canada.
An intriguing trend with Edmonton luxury homes is the impact of a generational shift. In the past, many homeowners decided to build luxury properties in the city. As older residents move out of the area, many of these homes are listed for sale, allowing newer luxury buyers to rebuild or renovate old properties.
The decision to buy older properties and renovate them has its own challenges. Namely, material shortages and insufficient labor have slowed new home growth. Without new homes on the market, sales will decline in 2023. Even so, residential building intentions increased by the end of last year. These conditions create a more balanced market for buyers compared to other cities in Canada.
Keep this in mind when searching for luxury properties
With this home market update, you’re more prepared to enter the luxury real estate market. 2022 experienced drastic changes in market trends. These were the result of factors like rising mortgage rates and very low inventory. Even so, Alberta cities like Edmonton have avoided the worst of slowing trends. A strong economy and inventive trends transforming existing real estate are part of its resilience. Navigating luxury market trends can be difficult without the help of an experienced real estate agent. When you’re ready to start your search, contact experienced agent Ryan Debler to guide you through the process.
