Rising housing values are helping to create more wealthy people in Canada. A study by the Deloitte Center for Financial Services says the number of millionaire households in Canada will grow from 1.745 million to 2.413 million by 2020, an increase of 38 per cent. As Michael Nairne of the National Post pointed out, the study estimated there are 182,000 households in Canada worth between $5- and $30-million and 17,000 households in the $30-million plus cohort. Together these constitute a startling one out of every 65 households in Canada. Who would have imagined that so many pentamillionaires and decamillionaires live among us?
Canada currently ranks seventh in the world for millionaire households. By 2020 it is expected to drop to eighth as the emerging economy of China produces more millionaires.
The study says real estate accounts for about 21 per cent of the asset allocation of Canadian millionaires, which is about the same as it is for the wealthy in the U.S., the U.K., Japan and Germany. Millionaires in Hong Kong, Italy and Spain have more of their money tied up in residential real estate. Most Canadians also have a higher percentage of their net worth in real estate because of the price of housing.
A separate study by BMO Harris Private Banking says that almost 95 per cent of Canadians with $1 million or more in assets say they are self-made, and 80 per cent are enjoying greater wealth than their parents. Only six per cent said they inherited most of their wealth. “Those findings speak to the strong entrepreneurial environment in which we live,” says Andrew Auerbank of BMO Private Banking. But only 58 per cent of those surveyed are confident that their children will be able to mange their inheritance.
With all this money floating around, it’s not surprising that Canadaís luxury home market is thriving. A recent report from Re/Max says that luxury sales are surging in about two-thirds of Canadian markets, and that six of the seven major Canadian cities are posed to set new records by the end of this year. Re/Max says the economic recovery along with equity gains is pushing the luxury market.
“The strength of the upper-end segment continues to defy expectations,” says Elton Ash, regional executive vice-president, Re/Max of Western Canada. “That demand remains largely domestic speaks to the solid underpinnings of the market, while underscoring the appeal of Canadian real estate on an international stage. Western Canada in particular will continue to see the upside benefit of investment from abroad.”
Canada’s most expensive real estate market is Vancouver, where Re/Max defines the luxury price point as $2 million and up. Vancouver is seeing many sales to foreign investors, particularly those from mainland China. Luxury sales have more than doubled compared to last year. Prices at the top end of the market have gone up by two per cent. Condos represent a very small percentage of Vancouverís luxury market, says Re/Max.
In Toronto, where the luxury price point is set at $1.5 million and up, luxury sales are up by nine per cent. The most expensive single sale was $17.5 million estate in Teddington Park. The old established high-end neighbourhoods in Rosedale, Forest Hill, Lawrence Park, Bridle Path, Hoggís Hollow and the Kingsway continue to drive the market, but luxury homes are also selling in communities like Leaside, the Beach and the Annex. In the last four months, 26 high-end condos have been sold in the city.
Calgary’s luxury sales ($1 million and more) are up by 51 per cent. The most expensive condominium ever sold in Calgary went for $4.1 million recently, and there were two other condo sales for more than $3 million.
In both Vancouver and Toronto, Re/Max says inventory levels are limited, resulting in multiple offers for some homes.
“As Canadaís millionaire club swells in size, inventory will play an increasing role in future, as the existing upper end housing stock struggles to keep pace with growing demand in central core areas,” says Re/Max. It says new construction, infill developments and renovations are helping fill the void to some extent and driving up prices. “The building activity is also serving to create new prime areas that were once considered high-end peripherals, as well as in suburban communities,” says Re/Max.
Written by: Jim Adair