Vancouver’s luxury market is being reshaped by new buyer sentiments and economic factors like high housing prices and low supply.
That’s according to a new report from Sotheby’s International Realty Canada, which found the third quarter of 2023 “defied seasonal trends.”
Luxury condo and single-family home sales over $4 million declined by 18 per cent year-over-year in the first half of 2023. However, luxury market sales took a turn in the summer with an increase of 96 per cent year-over-year between July 1 and Aug. 31.
“Whether it was Toronto, Montreal, Vancouver, we saw strong a July and August and then somewhat of a pullback in September, but probably more pronounced in Vancouver than in any other market,” said Don Kottick, president and CEO of Sotheby’s International Realty Canada.
Vancouver’s more pronounced pullback is attributed to the impacts of inflation, higher mortgage rates and Vancouver’s persistently low housing supply, he said.
Beyond just the luxury market, high borrowing costs are dampening sales in B.C, with home sales trending at below average levels in September, according to an Oct. 12 market update from the B.C. Real Estate Association.
Luxury buyers in Vancouver have shifted their preference towards single-family homes, with this property type accounting for 89 per cent of the 55 properties sold between July 1 and Aug. 31 at over $4 million, according to the Sotheby’s report.
This represents a 145 per cent annual increase over the summer months.
There were four single-family homes sold for over $10 million during this period compared with two sold in the summer of 2022.
September sales for properties over $4 million decreased by 26 per cent annually to 14 homes sold.
“Single-family homes are really driving the luxury market, specifically in the third quarter. What we've also seen is the gap between luxury condos and single-family homes has somewhat narrowed and the result of that is we're starting to see the elevated prices of luxury condos,” he said, adding that there are also increases in the costs of maintenance fees for condos.
“People are saying, ‘Well, listen, this is the amount of money I get for a luxury condo,’ and then compare that to the benefits of a single-family home and that's where we think there was kind of that pullback.”
As luxury homebuyers navigate the market amid an uncertain economy, they are being more “discerning” in their decision-making, said Kottick.
“Buyers right now are taking their time. They're making sure that they find the property that really meets their certain lifestyle. We're seeing extended search times and when they get to an offer situation, we're seeing that they're involved in more detailed negotiations than we've seen in the recent past. We're also seeing that if luxury buyers don't get the terms and conditions that they want, they will then walk away from the deal,” he said.
It is predicted that these sentiments will continue in the fall and into the winter as buyers face multiple economic headwinds, he said.
“Luxury buyers, historically, have been very resilient. They're very adaptable, but they're also not bulletproof,” said Kottick.