What is happening with the local luxury real estate and homes markets?
All too often when luxury real estate markets are discussed and highlighted the focus goes offshore. But this is not the case in the Christies Global luxury real estate Market Report for 2017. Luxury defined is Christieâs International Real Estate fifth annual white paper that looks at 100 luxury real estate brokerages around the globe. This paper provides insights into the residential luxury property market.
Having said this the Comox Valley’s luxury real estate market has taken off over the past year. A total of 32 homes sold for over 1 million dollars in 2017 and there have already been three sales at this level this year. Moreover, they are often selling quickly- often in only days after being listed.
What constitutes luxury real estate varies around the globe. The report tells us that homes under $1 million are luxurious in Costa Rica but the same luxury level rises to more than $10 million in Monaco. The report tells us that the worldwide average price of a luxury home is $2.1M. The entry level luxury home in Zurich is about $6M whereas in Miami it is âjustâ $2M. Having said this most Canadians would still use $1 million as a really good metric for a luxury home even though average homes in areas such as Vancouver and surrounding suburbs are breaking the million dollar mark. Just as beauty is in the eye of the beholder so is luxury.
Hong Kong leads the world as the top ranking city for luxury real estate. It is followed by London, United Kingdom, New York, Los Angeles and Singapore. Sidney is 6th followed by San Francisco, Paris, Toronto (yes Toronto is 9th in the world) and Miami. Pretty lofty levels for a Canadian city amongst those topping the world at the luxury level.
While prices of million dollar plus homes have increased globally, so has the time required to sell them which now sits at about 220 days (based on 2016 sales). Stepping up to the next level which is referred to as the ultra-prime luxury market, there are generally about 1500 homes for sale at the $20 million dollar level and about 30 for sale at the $100 million dollar level. Hong Kong generally has the most homes listed at the ultra-prime level.
Perhaps more interesting from a Canadian perspective is what this paper calls the luxury thermometer which reveals market momentum. Momentum often has an effect on home prices and high-end inventory.
Toronto is ranked as the hottest performing luxury real estate market worldwide. 
And guess which market is second? Victoria BC followed closely by San Francisco, California, and Austin Texas, and Charleston South Carolina. Honk Kong is listed as the worldâs top ranking city for luxury real estate around the globe. The shift towards Victoria is attributed to the 15% tax levied on nearby Vancouver but it can also be attributed to more affordable homes for the same money when compared to Vancouver. Victoria offers a terrific alternative to Vancouver.
What happens in Victoria does not necessarily stay in Victoria when it comes to real estate. Shifts in real estate trends from Vancouver to Victoria often then move up Vancouver Island to Nanaimo and the Comox Valley. If this trend spills over to the luxury home market, sellers of luxury homes in the Comox Valley can look forward to next year as a growth opportunity.
The worldâs affluent population grew by 4.2% in 2016 and their wealth expanded by 2.5% Yes the rich did get richer and there was more of them. This is a good thing when it comes to our local luxury real estate markets. We need more buyers capable of buying luxury homes if we expect to be able to sell more of them. What about other trends? When uncertainty prevails, luxury residence sales often soften. The biggest uncertainty in BC at the moment is how long our coalition government will last. As well, we saw the first volley from the federal government on interest rates with a 1/4 percent increase. A few more increases may have a chilling effect. Low interest rates helped fuel the recovery in the global economic cycle and we do not need the government to raise rates beyond more than what they have already done if they want to perpetuate the growth.
Uncertainty also undercuts secondary residence spending. Will Victoria follow suite with a tax on foreign buyers like what happened in Vancouver? Letâs hope not. The free market should prevail and not be driven by government interference. When governments get involved history is replete with examples of unexpected and unintended negative consequences.
Luxury home markets are not driven by trends in the average home market. People with sufficient free capital to invest at this level are motivated by other things such as preservation and growth of capital, diversification against geopolitical risks, defense against inflation, diminishing volatility, lifestyle, and the desire to own a beautiful asset of lasting intrinsic value.
Victoria and Vancouver Island in general have seen rising prices for most of 2017 to date and lower inventory than in the recent past. This does not mean, however, that sellers can or should set unrealistic asking prices in a rising and strong sellerâs market. The property value of luxury homes is dependent on several unique factors such as location, provenance, quality, rarity, and comparable value. Yes comparable value does factor into decisions made at the luxury level as well as any other level in the real estate market. Price it too high and a home will sit and the listing will become stale over time. Homes should always be priced ârightâ for the market at the time they are listed. Real estate agents who suggest asking whatever price you want should be viewed with suspicion and they should be asked to provide facts to back up their opinion.
Luxury home buyers are often very well versed and knowledgeable and they want to know that the prices they are being asked to pay are justifiable based on recent property sales. Once you get outside a âcomparableâ price range, properties sit. As an example, when home prices exceed the $1 million dollar mark in the Comox Valley about 10% of them actually sell in an average year. In 2017 to date there have been 8 million dollar sales yet there are 46 active listings so the rate is up a bit to 17%.
What does $1 million dollars buy around the world? In Cannes France it will buy a 650 square foot apartment. In London England you can get a larger 668 square foot apartment. In Montreal you get a 1650 square foot apartment. On Vancouver Island you can get a really nice single family home.
What are some of the trends in luxury homes? Kitchens are often the focus and hub of the luxury family home. A great kitchen is said to fuel a healthier lifestyle with more sit-down dinners, conversation opportunities and healthier dining choices. Large master bedrooms and large closets continue to be a highly desirable amenity for luxury home buyers. The passion for recreation at home is getting more expansive and important and home theatres are almost a must. As homes go up in value and the need for privacy increases so does the need for security systems, especially when the location of these high end homes is remote and away from the hustle and bustle of busy and active neighbourhoods. Many other kinds of technology are filling the need to control most aspects of life in these high end abodes.
If you are looking for affordable luxury try looking at Victoria BC and the rest of Vancouver Island. The scenic vistas are spectacular and you may just be drawn to our Island Lifestyle.
To read the full 88 page Christies report click on the following linkChristies Luxury Defined Report 2017
