Luxury Market Taking Off

Screen shot 2011 02 24 at 6 16 22 PM
Luxury Home

Luxury homes are in high demand in Edmonton, and the rest of the country according to a survey released by Remax todaySales of luxury homes increased in 2013 (compared to 2012) as follows: Vancouver 36%, Calgary 34%, Edmonton 32%, Hamilton-Burlington 31%, Kitchener-Waterloo 27%, Toronto 18%.Here is what it looks like on a chart:

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Edmonton Area Luxury Home Sales

Here is what it looks like when you include the boom:

LuxurySales
LuxurySales

So it looks like 2013 was in fact a record setting year for luxury sales in the Edmonton area. And keep in mind, these numbers only include homes sold through the MLS, and I've certainly seen a lot of new construction that falls in the luxury category around Edmonton. The question is, why the sudden jump in luxury sales?

Luxury sales are not just increasing in number, but also in market share. In 2012 2.5% of homes sold were in the luxury category, while 3% of total homes sold in 2013 where luxury homes.

First there are the obvious reasons such as a rapidly expanding population, impressive job creation and low interest rates. The Remax report sites consumer confidence bolstered by job security as the catalyst for the increase in luxury sales. Interest rates may have had an impact on two levels - first off low levels make higher prices more affordable, and fear of higher rates can motivate buyers to jump.

Don Campbell raised a couple of other excellent reasons on his blog:

Many higher-income/net worth families have already purchased their ‘second/vacation property’ located in the US or Canada during the downturn, so their next move is to upgrade their home lifestyle. This is helping to prop up the higher end market in these key cities.

Investment alternatives (savings and bonds for example) are providing higher net worth individuals with lower return, so many are turning to putting that money into their home choices.

There's lots of luxury homes on the market right now, about a 6 month supply - check out Luxury homes for sale in Edmonton.

Barring any major financial meltdowns or regulatory/lending rule changes, I don't see any reasons this trend won't continue in 2014 in Edmonton, what do you think? 

About 

Sara MacLennan is the Director of Marketing at Liv Real Estate and a licensed Real Estate Associate. The bulk of Sara’s experience and wealth of expertise lies in on-line technology and marketing both for agents and consumers. Sara is the former National Director for Interactive Marketing for Coldwell Banker Canada where she was responsible for an extensive training program traveling to offices across the country training agents and brokers on marketing and technology. Find Sara on Twitter @edmontonblogger.

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15 Responses to “Luxury Market Taking Off”

  1. Inspector GadgetNo Gravatar 29. Jan, 2014 at 4:11 pm #

    As long as debt is cheap to service it will continue, no doubt. I just wonder how many purchasers of these homes are putting all of their eggs in one basket and will regret it later when the debt looms and the fancy finishings are out dated and no longer considered luxury.

  2. a common guyNo Gravatar 29. Jan, 2014 at 6:06 pm #

    I am surprised $750k+ is considered luxury. Many people who purchased pre-boom must have their mortgages paid off and some more (if they are good savers), so it is not hard to imagine they want to upgrade.

  3. yeglandNo Gravatar 30. Jan, 2014 at 8:22 am #

    I think that the definition of Luxury needs to be reviewed. I scrolled through some of the listings (as provided above), and especially at the 700-800 range, I would never call most of those homes luxury, some of them are completely dated and others are just big, and plain with wasted space. The title should read ” Expensive House Market Taking Off” or “$750,000+ Housing Market Taking Off”.

    Defining every house over $750 as luxury is not correct. That $750 mark might need to be raised closer to 1 million to keep up with trends in the Edmonton housing market.

    IG – Agreed, I know far too many people that have maxed themselves out on housing, and some how they still find enough credit to buy all of the toys. Any increase in interest rates will instantly send them into the fetal position and onto the street.

    People aren’t trying to keep up with the Jones, they are trying to be the Jones.

    • Sara MacLennanNo Gravatar 30. Jan, 2014 at 1:49 pm #

      Luxury is typically defined as the top 5 or 10% of the market place. In this case, sales over $750k only make up 3% of our total sales so it certainly qualifies from a price perspective. While there are homes for sale asking that much money that might not meet your criteria of luxury, they haven’t sold yet… people can ask whatever they want for their property, it doesn’t mean it’s worth that much.

      • wsnNo Gravatar 30. Jan, 2014 at 2:05 pm #

        Houses over $750k far exceed 3%, just that they are mostly new builds, not on MLS.

        The notion that a certain fixed percentage is luxury is not correct either. Some cities simply don’t have many luxury homes. It’s like, even if a car is in the top 5% of Kia, it’s still not a luxury car, while at the same time, most, if not all, Mercedes are luxury cars.

        In Edmonton, personally I view new constructions of 2000sf main floor area (could be 2 level or bungalow) and at least $180/sf of real cost to build to be luxury. The threshold can drop to 1800sf, if the the house is not new but with good location or some view or walkout to compensate.

        • Sara MacLennanNo Gravatar 30. Jan, 2014 at 2:39 pm #

          First off, there is a HUGE difference between a 2000 square foot bungalow, and a 2000 square foot 2-story. The bungalow would probably qualify in the luxury category, but the 2-story at that size is pretty typical for new construction these days. Of course, either one could be on an amazing or crappy lot, be decked out head to toe or cheaply finished and have any number of other differences. That’s why we use a price point to determine what is luxury. Also, luxury in Edmonton has a much different price tag than luxury in Vancouver or Moncton. A Mercedes costs the same in all those cities. Which leads me back to the reasoning for using a certain percentage of the top sales in any given marketplace to determine what is luxury.

          • wsnNo Gravatar 30. Jan, 2014 at 2:51 pm #

            Please read again, word by word. I never said a 2000sf 2 level.

          • Sara MacLennanNo Gravatar 30. Jan, 2014 at 4:59 pm #

            Ah, ok… makes more sense now. I’ve never heard anyone refer to just the main floor square footage like that.

  4. Inspector GadgetNo Gravatar 30. Jan, 2014 at 5:51 pm #

    Don’t worry Sarah, the way it is written is very confusing. You are also right about the way to determine what the line is for luxury. It has to be a commonly agreed upon cost in a jurisdiction that changes year to year as inflation makes things more expensive. You very correctly point out that the Kia is the same price in all markets, unlike housing, land costs and incomes. Income levels also should play a part, like the affordability statistic.
    WSN would just claim that he is to decide what is luxury, unless of course someone else said it, then he would disagree.

    • 123kidNo Gravatar 30. Jan, 2014 at 9:24 pm #

      wsn just a passionate guy living out in windermere…

      in this case the 750k mark is a natural base line for comparison across the markets/locations; and is seemingly given a qualitative notion of “luxury”

      Trust me, 750k in downtown YVR gets you garbage.

      • wsnNo Gravatar 31. Jan, 2014 at 11:23 am #

        That’s what I meant. The term “luxury” and “expensive” are different. Not one word for a reason.

        “Luxury” means very comfortable living. “Expensive” means the price is high. You can have a million dollar shack (or even bare land) or a $50k Kia. But they are not luxury.

  5. GMNo Gravatar 30. Jan, 2014 at 7:43 pm #

    Now I know why the average price is increasing.

  6. wsnNo Gravatar 31. Jan, 2014 at 11:26 am #

    BTW, I think Sara used the same photo the last time she discussed about high end homes. The same house just couldn’t get sold. Previously listed for more than $1M, now in the $800k range. If the trend continues, it could drop below the $750k mark very soon …

    • Sara MacLennanNo Gravatar 31. Jan, 2014 at 12:42 pm #

      That’s a house we sold in 2008, I just really like the photo, I had to wait a long time for the lighting to be perfect when I took it.

      • wsnNo Gravatar 31. Jan, 2014 at 12:49 pm #

        Check out: E3356572