Luxury Market stumbles, but still records 2nd best year
The BC luxury home market stumbled in 2012 as sales of high-end homes fell 36% from their peak in 2011. However, even with the drop, 2012 was still the 2nd best year in history for sales of luxury homes.
439 $3-million+ homes transacted in 2012, down from a peak of 691 in 2011. However, to demonstrate how far prices in BC's real estate market have increased over the past 10 years, only 10 homes sold for over $3 million in the year 2000. Of the 439 homes that sold for over $3-million in 2012, 107 sold for over $5-million and 44 were condos or townhomes. The most expensive home sold in 2012 was by Macdonald Realty for $19.8 Million.
The majority of homes sold for over $3 million in 2012 were located in Vancouver's Westside. West Vancouver was also well represented while a disproportionate number of expensive homes sold in South Surrey/White Rock. Outside the lower mainland, Vancouver Island saw 8 $3-million+ sales while the Okanagan recorded 4.
Dan Scarrow, Vice President at Macdonald Realty, believes that immigrant buying patterns are driving the luxury market. "For the past few years, we've seen lots of new investor-class immigrants coming into the market," says Scarrow, "and they're not just buying a house for themselves, but also 3 or 4 residential investment properties as well. This has meant that only certain areas with high investor-class immigrant populations have prospered."
Scarrow, has seen a change though. "The past year has seen a significant shift in how these individuals purchase real estate," he says, "now, they're taking their time and only buying a principle residence."
This is for two reasons. "First," says Scarrow, "Vancouver-area house prices have grown at a disproportionately higher rate than other investment classes for the past few years and most investors realize that that trend cannot be in perpetuity. Second, expectations of flat prices results in speculators standing on the sidelines and a flat market becomes a self-fulfilling prophecy."
All that said, Scarrow still believes the market is resilient. "Buyers are still there and they're not scared. They just no longer think that there's any immediate urgency to buy. If you demonstrate value, people will still buy."
The story has been somewhat different outside of the lower mainland as many areas never experienced the same Asian bump that Vancouver did. According to Macdonald Realty Kelowna manager Don Gerein, in the Okanagan, the luxury market still hasn't fully recovered from the Financial Crisis. "For the past few years, there has been a good selection of properties on the market and fewer buyers," says Gerein. "That said, buyers for this type of property are constantly looking for a deal and when the right deal on the right property shows up, they are ready to strike."
Gerein is optimistic for 2013. "We expect more buyers for these properties to make decisions in 2013 as the economy improves."In Victoria, the story is similar. According to Macdonald Realty Victoria Manager Lynn Van de Kamp, the luxury market has struggled since the 2008 financial crisis. "We're still playing catch-up from the peak at that time," she says, "but I'm optimistic for this year.