Vancouver’s luxury real estate market is seeing balanced conditions after an era of “pandemic over-exuberance” that saw the most acceleration over the past two years, according to Sotheby’s International Realty Canada.
According to their recent report, inventory for Canada’s luxury market evaporated during the third quarter of 2022, leaving demand with little promise of supply. Luxury sales in Vancouver over $4 million continued to decrease from historic highs with a 51 per cent year-over-year decline in July and August, while numbers from September indicate a decrease of 58 per cent from the previous year’s levels.
Despite this decline, the market is returning to a balanced place after two years of what can only be described as an “anomaly,” says Don Kottick, President and CEO of Sotheby's. The “anomaly” years combined with rising interest rates, inflation and general market volatility is causing many buyers and sellers to remain on the sidelines.
“I think what we're gonna see over the next little while is some of those buyers and sellers are going to have to come off the sidelines due to the need, probably personal. And as this happens, I think we're going to start to see inventory levels grow,” Kottick said.
The report says that price and activity stickiness will prevail as buyers and sellers adjust to the market, despite the greater financial ability for luxury and ultra-luxury consumers to absorb the impact of rising rates and inflationary pressures.
Overall, sales over $1 million were down 37 per cent year-over-year to 512 properties. Sotheby’s says that this is representative of the normalization that the market is seeing.
The report also notes that while multiple offers on a listing is now rare, the homes that were priced competitively for the market saw success in selling. However, those that were not prices according to market conditions needed price reductions in order to get buyer interest.
“With top-tier inventory remaining low in relation to the city’s strong undercurrent of housing demand, competitively priced properties in premier neighbourhoods have continued [to] attract bids, and on rare occasion, bidding wars,” the report said.
Kottick says that while rising interest rates certainly have an effect on the market, they aren’t as detrimental in the luxury and ultra-luxury real estate crowd.
“The one thing about the interest rate increases is that they really impact the first time buyer. That's where you really take away the spending power of the consumer,” he said.
Sotheby’s report says that as more sellers price their homes in line with market conditions and inventory levels begin to rise, prospective buyers will be more inclined to re-enter the market and overall activity will resume.