Real estate buyers are shopping the luxury segment

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As the Toronto-area real estate market begins to wind down for 2019, some buyers are bidding up the prices of luxury properties.

Andre Kutyan, a real estate agent with Harvey Kalles Real Estate Ltd., was representing house hunters who recently considered making an offer on a house with an asking price of $4.395-million in Lawrence Park.

Mr. Kutyan thought the price was “too good to be true” as soon as he saw the listing for a renovated house in the upscale neighbourhood.

Mr. Kutyan’s clients decided against making an offer because the house doesn’t have a garage, but Mr. Kutyan kept track of the sale. Offers landed from two competing buyers and the house sold for $4.6-million, or $205,000 above the asking price.

By setting an asking price below market value, Mr. Kutyan says, the listing agent likely drew more attention to the property.

Mr. Kutyan has seen significant movement above the $4-million mark in Rosedale, Lytton Park and Yorkville as well.

The agent recently sold a townhouse unit at One St. Thomas near Bloor Street West and Bay Street for the full asking price of $4.888-million. One buyer came to the table but others were circling, he says.

Mr. Kutyan has also noticed an uptick in interest from Canadian expatriates currently living in Hong Kong. Tensions between Hong Kong’s pro-democracy movement and Chinese authorities have been rising, with the unrest sometimes leading to violence and bloodshed.

Mr. Kutyan has been chatting with some potential purchasers at open houses and appointments for viewing his listings. He says buying real estate in Canada may be a back-up plan in the event the political situation in Hong Kong deteriorates.

“They’re feeling out their options,” he says.

Mr. Kutyan is acquainted with some Hong Kong-born students who moved to Canada for high school or university, then returned to the Asian financial capital to work. Many former students now have Canadian citizenship or permanent resident status but they work in Beijing, Shanghai or Hong Kong. Another friend is a Canadian-born employee in the banking industry who moved to Hong Kong to pursue his career. Now he is thinking about returning.

“If everything is fine politically, these are great cities to live in," he says. “But it’s good to have a Canadian passport in your back pocket.”

Most of the house hunters have ties to this country already.

“Very rarely do I see someone with no status in Canada buying a property.”

Mr. Kutyan has a four-bedroom house listed for sale at 70 Carmichael Ave. near Avenue Road and Wilson Avenue. The 4,000-square-foot house, with an asking price of $3.695-million, has drawn some interest from visiting expatriates, but no one has pulled the trigger yet, he says.

Mr. Kutyan says that because the potential buyers are citizens or permanent residents of Canada, a foreign-buyers tax introduced by Ontario’s provincial government in April, 2017 has zero impact on their purchase.

Boris Kholodov, a real estate agent with Johnston & Daniel, a division of Royal LePage Real Estate Services Ltd., says the 15 per cent foreign-buyers tax does have an impact on some investors.

The tax is a deterrent to those potential buyers who work in Canada, but don’t have permanent resident status, he says.

“It makes it silly for these people to buy,” Mr. Kholodov says.

The government does offer rebates to return the tax money to foreign purchasers if they later satisfy any of the exemption criteria. Under one of those scenarios, the foreign buyer will receive a rebate if they have legally worked full-time in Ontario for a year after the purchase.

Mr. Kholodov says many potential purchasers end up renting rather than take the risk that they won’t have a job one year later.

“They’re not able to buy with the same confidence as the local buyer,” he says. “The way this tax was implemented, it was meant to discourage absentee investors. But it has discouraged people who work here because they have to gamble on still having the same job in a year.”

Juwai.com serves Chinese-language clients who are mainly based in China and Hong Kong and looking to purchase property abroad. While the Shanghai-based real estate portal has not been tracking whether five months of unrest in Hong Kong has increased searches for property in Canada, communications director Dave Platter says that demand for Canadian real estate has remained high in 2019.

Hong Kong-based Eli McGeever is the vice-president of international property for Soho, which is a social network that brings together buyers, investors and agents in real estate. He says interest in Canadian property has been growing rapidly over the past few months.

In an e-mail, Mr. McGeever said an estimated 300,000 Canadian passport holders live in Hong Kong.

Mr. McGeever tracks Hong Kong property marketing exhibitions, where property from overseas is sold to buyers in the financial hub. He notes that the number of Canadian real estate exhibitions per month is up more than 50 per cent since the start of June.

Over the past three months, Toronto has accounted for 30 per cent of the Canada exhibitions, he says, and that number has increased in the past 30 days to 45 per cent.

“Hong Kongers used to buy Canadian property as an investment, but now it’s an escape route,” he says. “Many people are worried that Hong Kong won’t return to peace and growth in the near term. Some worry that Hong Kong will never again be what it was as recently as earlier this year.”

Looking ahead to 2020, Mr. Kutyan expects the first quarter to be busy. Downsizing boomers are still a force in the market and he knows some are getting ready to list existing houses for sale in January and February.

“I’m gearing up for the New Year,” he says. “That’s a great time to be on the market – as long as the weather co-operates.”

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