What's driving Toronto’s high-end real estate boom?
The Greater Toronto Area’s luxury housing market is seeing purchase activity soar, driven by interest rate cuts and robust equity markets. Recent data from RE/MAX Canada highlights a significant rebound, with sales of homes priced at $3 million or more climbing 41% year over year in 2024.
The Bank of Canada’s rate cuts—two consecutive 50-basis-point reductions—ignited demand for high-end properties in the region during the fourth quarter of 2024. Sales in the $3 million-and-above bracket totalled 364, a sharp increase from 259 in the same period in 2023. Notably, transactions involving homes priced at $5 million or more surged 59%, while those exceeding $7.5 million rose 41%.
Christopher Alexander, president of RE/MAX Canada, attributed the upswing to a combination of pent-up demand and reduced borrowing costs. “The impact of the first and second 50-basis-point rate cuts by the Bank of Canada radiated throughout the GTA in the fourth quarter, jumpstarting demand for high-end properties both within the city and suburbs. We’ve been expecting a surge in top-tier sales activity as the economic climate and corresponding pause in buying intentions prompted a build-up in pent-up demand. The fourth quarter did not disappoint,” he said.
Year-long growth in luxury sales
For the entirety of 2024, luxury home sales in the GTA grew by 4%, with 1,513 homes sold at or above $3 million. Higher-priced properties experienced even greater growth: sales of homes priced at $5 million or more increased by 21%, while homes over $10 million rose by 17%.
Despite Toronto’s higher land transfer tax, implemented in January 2024, the luxury market has adapted. Sales in the suburban 905 area represented nearly half of all transactions in the $5 million-plus range, a notable increase from 36% the previous year.
Converting financial gains to real estate
In addition to interest rate cuts, strong equity market returns in Canada and the United States have provided affluent buyers with the capital to invest in real estate. “Profit-taking was widespread at year end, with many stakeholders converting paper wealth to material wealth,” Alexander explained, noting similar trends in US cities like Miami and New York.
Outlook: Confidence amid challenges
The momentum from late 2024 sets the stage for a potentially robust luxury market in 2025. However, supply remains a concern. While more listings are expected, demand from sidelined buyers may continue to outpace availability.
Affluent buyers are optimistic, supported by favourable market conditions and extended insurance coverage from Canada Mortgage and Housing Corp., which is expected to ripple through various price segments.
However, Alexander cautioned against overconfidence, citing potential political shifts in Canada and the US as factors to monitor.
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