Canada’s luxury residential real estate market is flying high these days, thanks in large part to robust consumer confidence and economic optimism, says a new report from Sotheby’s International Realty Canada.

Driven by what Sotheby’s Fall 2021 forecast report called “pandemic-related influences,” such record-low interest rates, H1-2021 saw record-breaking activity in the country’s luxury housing market, including in urban centres which reverses a trend that lasted through 2020. Canadians’ propensities to resume city living has been buttressed by a reopening economy, including in the entertainment sector, and it is driving luxury condominium sales in major urban centres.

“This has been further magnified by the shortage of single-family and attached home supply, and resulting affordability challenges, which are compelling prospective buyers across every generation into condominiums out of necessity,” said the report. “In recent two months, across every metropolitan market, top-tier condominium sales activity has exceeded industry projections and contradicted anticipation of a seasonal summer slowdown. In the GTA, which has seen demand for luxury condominiums steadily increase since the start of 2021, sales of luxury condominiums over $4 million were up 40% year-over-year in July and August. Montreal’s luxury condominium sales surpassed optimistic industry expectations over the summer months, as $1 million-plus sales increased 30% year-over-year, with $4 million-plus condominium sales remaining consistent. Similarly, sellers’ market conditions were sustained in Vancouver’s top-tier condominium market through the summer, as sales over $1 million increased 22% year-over-year and luxury condominium sales over $4 million remained on par with 2020 levels.”

The employment picture in Canada has ameliorated this year and is expected to remain strong through the remainder of the 2021, however, recovery has been uneven throughout the country. In August, employment increased for a third straight month, putting it up 0.5% year-over-year and bringing the national unemployment rate down to 7.1%—the lowest since the pandemic began.

“During this time, unemployment rates fell in every major metropolitan real estate market. Vancouver’s August unemployment rate saw the most dramatic decline as it fell to 7.1% (down 5.9% year-over-year), while Montreal’s unemployment rate fell to 7% (down 4.9% year-over-year),” said the report. “Although unemployment rates in Toronto and Calgary remained above the national average, they also decreased to 9.3% in Toronto (down by 4.7%) and to 9.6% in Calgary (down by 4.8%). Although the economic and labour market recovery remains deeply unbalanced, its improvement, particularly for mid/high wage sectors, has bolstered confidence and will continue to support the recovery of Canada’s conventional and luxury housing market in the months to come.”

One reason for the luxury market’s gains is critical undersupply of housing inventory in Toronto’s, Vancouver’s and Montreal’s conventional housing markets. Sotheby’s anticipates that this trend will continue undermining transactions this fall. The $4 million-plus segment of the luxury market saw sales surge to historic levels in the first half of the year before softening during summer, albeit temporarily.

“Activity has resurged in the preliminary weeks of fall. While a balanced market is anticipated for Calgary, extreme demand-supply housing imbalances across Toronto, Vancouver and Montreal are deeply embedded. This is now revealing itself in increased activity in the comparatively accessible top-tier condominium market, buyer fatigue and hesitancy, market conditions that almost universally skew in favour of sellers, and continued price gains in the months ahead.”