Downsizing baby boomers are driving year-over-year gains in luxury condo sales in Toronto and Vancouver, according to a report released this week.
The 2015 RE/MAX Spotlight on Luxury Report looked at sales activity from the beginning of the year through to the end of July. The 320 condos sold for more than $1 million in the Greater Toronto Area during this time frame marked a 42-per-cent increase over the same period in 2014. The 401 condos sold for more than $1 million in Greater Vancouver during this time frame marked a 33-per-cent increase over the same period in 2014.
The phenomenon of downsizing baby boomers is not new, but their growing influence in the luxury condo market is, and it’s a trend Elton Ash, regional executive vice president, RE/MAX of Western Canada, expects to continue.
“The typical homeowner is a baby boomer who’s been in their home a lot of years and has enjoyed huge equity gains,” says Ash, speaking to the Vancouver market, “so it’s an ideal time for them to downsize and then look at the luxury condominium market in downtown Vancouver or on the North Shore, and enjoy a pretty good lifestyle in their retirement.”
The $1-million-plus condo promises luxury amenities and low maintenance, which appeals to the typical baby boomer buyer, who plans to spend some time away travelling or in a second home. Also important to these buyers are quality and choice, adds Ash, to which the presale market owes its strength.
“Now they (buyers) have the opportunity, working with the builder, to do customized finishes,” he says. “Whether it’s Italian granite or Spanish tile, they don’t have to go with the stock options.”
The huge equity gains that have afforded downsizing baby boomers entry to the upper echelon of the condo market get at one of two factors driving sales of freehold homes in the luxury market. High demand for single-family homes, coupled with low inventory, has led to price appreciation, pushing more homes past the $1-million threshold.
The second of the two factors driving sales of freehold homes in the luxury market is foreign demand, especially from Chinese buyers. And in the Vancouver market particularly, these buyers have shifted away from an initial interest in condos for second generation use, such as for a child attending school in Canada, and toward a newfound interest in freehold homes for raising their families in Canada, says Ash.
“Now they’re — because of the stock market fluctuations going on — saying, ‘I want to put my money into a safe haven; North America is that safe haven and I am going to live there,’” he explains.
The 2,248 freehold homes sold for more than $1 million in Greater Vancouver from the start of the year through to the end of July marked a 41-per-cent increase compared to the same period in 2014. The 6,929 freehold homes sold for more than $1-million in the GTA from the start of the year through to the end of July marked a 55-per-cent increase compared to the same period in 2014.
The RE/MAX report predicts that the luxury market trends behind these sales stats will persist through the end of the year. Ash points to the influence of Chinese buyers as having particular room for growth, based on commentary at an Asian real estate conference in Vancouver suggesting that these buyers have only just begun to warm up to the cultural differences in the way real estate negotiations work in Canada.
“As [Chinese buyers] become accustomed to our North American business practices, what we’re seeing in volume today is only a small part of what it will be,” he says.
Michelle Ervin is the editor of CondoBusiness.