Sales are down, but prices remain high for luxury homes in the Greater Vancouver area, according to a Royal LePage report released Thursday.
The median price of a luxury detached home in the region rose by 5.2 per cent to $5.8 million in the first quarter, compared to the same time last year, while luxury condos increased by seven per cent to $2.5 million.
Sales of detached luxury homes dropped by nearly 40 per cent, however, while luxury condos saw a 27-per-cent drop.
Prices are expected to slow down for the rest of 2018, Royal LePage CEO Phil Soper said, as the effects of the new mortgage “stress test” and provincial policies like the speculation tax continue to be felt.
The stress test means that all borrowers must now qualify for a mortgage based on either the five-year benchmark rate or their lender’s actual rate plus two per cent, whichever is higher. The change will apply to all mortgages, new or renewed, even if the down payment exceeds 20 per cent.
The speculation tax, which comes into effect this fall, will hit all homeowners in B.C.’s urban areas who don’t pay income tax in the province. It will start at 0.5 per cent of the property value before rising to two per cent, and excludes rural cottages and cabins.
“The price appreciation that we are witnessing in Greater Vancouver’s luxury market this spring is largely a result of momentum being carried over from 2017,” said Soper.
“Price appreciation in the luxury market is expected to decline in 2018, while sales volumes are expected to continue to be lower than recent norms.”
By 2019, detached luxury homes are expected to drop in value by three per cent, while luxury condos are expected to rise by two per cent.
“Younger luxury buyers prefer condos for their affordability and little upkeep, while baby boomers increasingly prefer them as a downsizing option,” Royal LePage Sussex sales representative Brock Smeaton said.
“Of course, this demand also catches the eye of investors who see rental opportunities.”