Canada Luxury Real Estate and Villas Market

Canada Luxury Real Estate and Villas Market Overview

• The Canada Luxury Real Estate and Villas Market is valued at approximately CAD 13 billion, based on a five-year historical analysis. This figure reflects the most recent transaction volumes and average prices in the luxury segment, considering the high concentration of sales in major urban centers and the impact of recent market slowdowns in Toronto and Vancouver, offset by gains in Montreal and Calgary . Growth is primarily driven by demand for high-end properties, supported by a rise in affluent domestic buyers, continued foreign investment, and the appeal of luxury real estate as a stable asset class. The market has seen a notable uptick in luxury home sales in Montreal and Calgary, while Toronto and Vancouver have experienced a moderation in activity due to increased inventory and economic headwinds .
• Key cities dominating this market include Toronto, Vancouver, and Montreal. Toronto’s diverse economy and cultural vibrancy continue to attract high-net-worth individuals, with ultra-luxury transactions in the city showing resilience even as broader sales volumes have softened. Vancouver’s scenic appeal and international profile maintain its status as a luxury destination, though the market is currently characterized by higher inventory and longer selling timelines. Montreal stands out for its robust year-on-year growth in luxury sales, driven by relatively attainable price points and strong consumer confidence. Calgary is also emerging as a growth market, benefiting from economic stability and population gains .
• The Prohibition on the Purchase of Residential Property by Non-Canadians Act, 2022, issued by the Parliament of Canada, restricts foreign ownership of residential properties in urban centers. This regulation, effective from January 1, 2023, was introduced to address housing affordability and ensure greater access for Canadian residents. The Act prohibits most non-Canadians from purchasing residential property in designated metropolitan areas and imposes penalties for violations. Additionally, several provinces and municipalities require foreign buyers to pay a non-resident speculation tax, further influencing market dynamics and buyer behavior .

Canada Luxury Real Estate and Villas Market Segmentation

By Property Type:The luxury real estate market in Canada is segmented into Apartments & Condominiums, Villas & Landed Houses, Townhouses, Luxury Apartments, Waterfront Properties, Ski Resort Properties, and Others. Each segment addresses distinct consumer preferences and investment strategies. Demand for luxury apartments and waterfront properties remains strong, particularly in urban centers and scenic regions, driven by urbanization, lifestyle changes, and the desire for exclusive amenities. Ski resort properties continue to attract buyers seeking premium vacation homes, especially in regions like Whistler and Mont-Tremblant .

By Business Model:The luxury real estate market operates under two primary business models: Sales and Rental. The sales model remains dominant, as buyers continue to invest in luxury properties for personal use and as long-term assets. The rental segment is experiencing growth, particularly in urban markets and resort destinations, where short-term rentals cater to affluent tourists and business travelers seeking premium accommodations .

Canada Luxury Real Estate and Villas Market Competitive Landscape

The Canada Luxury Real Estate and Villas Market is characterized by a dynamic mix of regional and international players. Leading participants such as Sotheby's International Realty Canada, Engel & Völkers, Royal LePage, RE/MAX, Coldwell Banker, The Agency, Century 21, Bosley Real Estate Ltd., Oakwyn Realty Ltd., Harvey Kalles Real Estate Ltd., Johnston & Daniel, Chestnut Park Real Estate Limited, Phipps Realty Ltd., Urban Real Estate Group, Property.ca Realty Inc. contribute to innovation, geographic expansion, and service delivery in this space.

Canada Luxury Real Estate and Villas Market Industry Analysis

Growth Drivers

• Increasing Affluence of Consumers:The number of high-net-worth individuals (HNWIs) in Canada reached approximately 1.5 million, a significant increase from 1.3 million in recent years. This growing affluence is driving demand for luxury real estate, as HNWIs typically invest in properties valued over CAD 1 million. The wealth accumulation is supported by a robust economy, with Canada’s GDP projected to grow by 1.1% in future, further enhancing consumer purchasing power.
• Demand for Second Homes:The demand for second homes in Canada has surged, with a reported increase in purchases of vacation properties in future compared to previous years. This trend is fueled by remote work flexibility, allowing affluent buyers to invest in luxury villas in scenic locations. The Canadian Real Estate Association noted that the average price of a second home rose to CAD 800,000, reflecting the growing interest in leisure properties among affluent consumers.
• Urbanization and Migration Trends:Urbanization continues to shape the luxury real estate market, with cities like Toronto and Vancouver experiencing a population increase of over 1.2 million people in recent years. This influx is driven by both domestic migration and international immigration, leading to heightened demand for luxury housing. The urban population is expected to reach approximately 82% in future, further intensifying the competition for high-end properties in metropolitan areas.

Market Challenges

• High Property Prices:The luxury real estate market in Canada faces significant challenges due to soaring property prices. In future, the average price of luxury homes in major cities exceeded CAD 2 million, making it increasingly difficult for potential buyers to enter the market. This price escalation is attributed to limited inventory and high demand, which may deter new investments and slow market growth in the coming years.
• Regulatory Hurdles:Regulatory challenges pose a significant barrier to the luxury real estate market. In future, various provinces implemented stricter zoning laws and foreign buyer taxes, impacting the purchasing power of international investors. For instance, British Columbia's foreign buyer tax increased to 20%, which has led to a decline in foreign investment by approximately 15% in the luxury segment, complicating market dynamics and limiting growth potential.

Canada Luxury Real Estate and Villas Market Future Outlook

The future of the Canada luxury real estate market appears promising, driven by ongoing urbanization and a sustained influx of affluent buyers. As the economy stabilizes, with GDP growth projected at 1.1% in future, demand for luxury properties is expected to remain robust. Additionally, the trend towards eco-friendly developments and smart home technologies will likely attract environmentally conscious buyers, enhancing the appeal of luxury real estate. Overall, the market is poised for continued evolution and growth in the coming years.

Market Opportunities

• Growth in Eco-Friendly Developments:The increasing consumer preference for sustainable living presents a significant opportunity for luxury real estate developers. In future, eco-friendly homes accounted for 25% of new luxury developments, reflecting a growing trend. This shift is expected to attract environmentally conscious buyers, enhancing property values and marketability in the luxury segment.
• Expansion of Luxury Rental Markets:The luxury rental market is expanding rapidly, with a reported increase in high-end rental properties in future. This growth is driven by affluent individuals seeking flexibility and lifestyle options. As urban areas continue to attract professionals, the demand for luxury rentals is expected to rise, providing lucrative opportunities for investors and developers in the luxury real estate sector.