Foreign buyer ban has little impact on luxury real estate in Ontario and across Canada: report

The luxury home sales market appears to be on the rebound.

Sales of luxury homes were up in the first eight months of the year, compared to the same period in 2023, in almost all major cities in Canada with the exception of the two most expensive markets, Vancouver and Toronto, as well as Halifax, according to the 2024 Royal LePage Carriage Trade Luxury Market Report.

The foreign buyers ban, which Canada implemented in January 2023, hasn’t had a big impact of sales, the report stated. The federal government implemented a two-year restriction on the purchase of residential real estate by non-Canadians, in an effort to free up much-needed supply for local buyers.

The ban, which has since been extended until Jan. 1, 2027, contributed to reduced demand in some of the country’s most affluent markets for a brief period but it has not had a material impact on prices or available inventory, the report stated.

“Two years in, and the prohibition on foreign buyers has had virtually no impact on housing prices in Canada, as we expected. Prolonging the international buyer ban will not make housing more accessible to Canadians,” said Phil Soper, president and chief executive officer, Royal LePage.

Overall, however, the real market has been sluggish and luxury homes can be a hard sell.

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“Homes typically trade hands at the high end of the market at a slower pace than we see in the industry overall, as the funnel of potential purchasers narrows as the price of properties climbs,” said Soper.

While the number of sales in the high-end market are lower relative to the mainstream residential market, luxury markets are making gains particularly in western Canada including Winnipeg, Edmonton and Calgary, the report stated.

Interest rate hikes that have impacted borrowing costs for many home buyers, typically don’t affect luxury home buyers.

“Many buyers in the luxury market segment do not require high-leverage mortgages, where the amount borrowed relative to the value of the underlying property is large,” Soper said.

“In fact, it is common to see expensive homes purchased with very substantial down payments, or even fully in cash. Thus, luxury homebuyers as a rule are not as heavily impacted by high interest rates as the average consumer. It is primarily the positive impact on macroeconomic factors that will encourage new buyers in the luxury segment.”

The Toronto area luxury market is one of the areas which has seen a decline in sales — by five per cent in the first eight months of 2024, according to the report.

But the median price of a luxury property in Toronto increased 3.9 per cent year over year to $5,820,000, the report stated.

Many of the most expensive homes sold in Mississauga in August sold for under the list price. The most expensive sold went for $6 million.

“Given current market conditions, it’s no surprise that many buyers are looking for ‘deals’ and we have seen clients getting into the luxury market at a lower threshold,” said Gillian Oxley, sales representative, Royal LePage Real Estate Services Oxley Real Estate.

“Currently, buyers are prepared to be more patient when looking for the right home. That said, space and location continue to be the ultimate luxury. Homes that offer walkability to transit, the city’s high-end restaurants, parks and ravines, remain among the most sought-after listings.”

Properties that have sold over the minimum luxury price threshold in Toronto this year have an average of 4.2 bedrooms, 5.7 bathrooms, and 2,369 square feet of living space.

Oxley expects Toronto’s luxury market will see stronger levels of activity in the fall and improved market conditions in the spring, as lowered interest rates and economic stability lend to higher consumer confidence.

By comparison, the other Ontario city mentioned in the report, Ottawa, has seen an increase in sales by 13 per cent in the first eight months of 2024, the report states.

The median price of a luxury property increased two per cent year over year to $2,442,500. The entry-level price of a luxury property in Ottawa is $2 million.

See the full report here.

Lead photo of 1285 Tecumseh Park Dr.: Sam McDadi Real Estate Inc.