The top end of Canada’s real estate market is set for a boost from rising numbers of mobile, wealthy individuals looking for both residences and investment opportunities. That’s the news from Frank Knight, a global property consultancy based in London.
In a report published last week, Frank Knight identified both the highest concentrations of wealth creation, and the likeliest places for the new money to be spent. They estimated that the number of ‘High-Net-Worth Individuals’ (HNWIs), defined as ‘someone with $30m or more in net assets,’ would increase by 50% in the coming decade, pointing out that the numbers of such people had risen by 5% in 2012 alone. The key locations for wealth creation were identified as being in Asia and Latin America, and the most popular markets for property investment were London and New York.
Liam Bailey, Head of Residential Research at Frank Knight, said: ‘The largest concentration of wealth is currently based in the established centres of North America and Europe, but there is set to be rapid growth in Asia, Latin America and the Middle East. In the next decade we will see the biggest increase in ultra-wealthy individuals in cities such as Sao Paulo, Beijing, and Mumbai.’
Mr. Bailey went on to note that ‘according to a survey of advisors with 15, 000 ultra-wealthy clients, London and New York are still the most important destinations in the world.’ In London’s case especially, that’s explained in large part by its status as a ‘safe haven’ for investors seeking places to put their money that aren’t affected by the fluctuating markets, tax initiatives and economic downturns of the USA and Europe.
Of course, that puts Canada in a good position to benefit from the growth in the number of HNWIs. But they will increasingly look away from their traditional markets. That’s partly because of pressure on prices, in both London and New York, and partly because of a globally limited stock of luxury property. ‘Demand is ever rising,’ as Frank Knight’s report has it, ‘while the stock of desirable locations remains virtually static.’
Andrew Hay, head of global residential property at Frank Knight, told the Globe and Mail last week that the current weakness in Canada’s luxury real estate market is ‘probably a temporary thing.’ Over the long term, Mr. Hay predicted that Canada would become a prime location for luxury investment. Along with other likely growth markets such as New Zealand and Australia, ‘the rule of law, strong domestic balance sheets, political stability’ were likely to top the list of reasons why investors chose these markets, but Mr. Hay thought the clincher might be that ‘they are lovely places to live.’
And there are already signs that the market is being affected by the flow of money from newly minted HNWIs, primarily Asians. According to Sotheby’s International Realty Canada, Calgary led Canada in sales growth in luxury properties. ‘The trend has been upward and we don’t see any sign of that changing for awhile,’ said Ross Macredie, president and chief executive of Sotheby’s Canada.
Mr. Macredie cited Sotheby’s research showing that ‘Calgary is really starting to become a city of high net worth people and investment coming into the country,’ and pointed to Sotheby’s own Top-Tier Real Estate Report, a biannual study aimed at highlighting market trends for Canadian luxury properties, which indicates that the market for luxury homes across Canada is expected to gain momentum and ‘generate increasing demand from local and international buyers.’ In Calgary listings of properties over $1m were up 38% from 2011 and sales in the same category were up 21%, according to the Calgary Herald. ‘High-end neighbourhoods like Elbow Park and Glencoe were among those to see strong demand,’ according to Sotheby’s.
What has been Calgary’s experience in 2012 is now expected to be repeated throughout Canada’s major cities, but especially Vancouver, according to Mr. Hay. And there should be good news for high-end real estate outside of metropolitan areas, according to Don Campbell, a senior analyst at Real Estate Investment Network in Vancouver. ‘You are starting to see the wealthy not being concentrated in the hear of old Toronto and [Vancouver’s] West Van and British Properties,’ Mr. Campbell said.