Montreal’s luxury real estate market is poised for another slowdown in 2023, though expectations of a pause in interest rate increases could start luring buyers back by mid-year, property broker Sotheby’s International Realty Canada said.
Sales of Montreal residential properties valued at $1 million or more plunged 18 per cent to 1,476 units last year, resulting in a broadly balanced market for luxury housing, Sotheby’s said in a report released Wednesday. Transactions involving $4 million-plus homes advanced two per cent to 42 units.
After more than two-years of rising prices, real estate activity in major Canadian markets has cooled off in recent months as borrowing costs rose in tandem with the Bank of Canada’s policy rate. Canada’s central bank hiked its benchmark rate seven consecutive times last year, closing 2022 at 4.25 per cent. A year ago, the gauge stood at 0.25 per cent.
As interest rates rose, “a lot of luxury buyers decided to become more discerning,” Don Kottick, Chief Executive of Sotheby’s International’s Canadian arm, said. “From a unit perspective, we won’t be comparable to 2021 or 2022. We’ll see less unit sales” in 2023, he said.
The Bank of Canada’s next interest rate decision is scheduled for Jan. 25. Economists at the Bank of Montreal expect the central bank will raise rates one more time next week, by 25 basis points, before pausing until 2024. Canada’s central bank will probably need to maintain its policy rate at or above four per cent for most of 2023 to rein in inflation, the International Monetary Fund said in a report published in December.
While luxury housing prices in Montreal remained ‘resilient’ in 2022, they are expected to “gradually ease” this year across several market segments, Sotheby’s said in its report. Bidding wars became less frequent in 2022, forcing properties to spend more time on the market — and requiring brokers to step up marketing efforts — before qualified offers emerged.
