With local home prices likely to gain around 10% in value this year (the Jan-Aug 2016 vs 2015 sales stats suggest this, as well as the recent CREA forecast), some assume – and understandably so – that homes in higher price ranges may have trouble selling these days because they’ve become less affordable.
This isn’t what we’ve seen. In 2016, we’ve listed more high-end (over 700k) homes than ever before, and they’re not just collecting dust – they’re moving relatively quick and our seller clients are thrilled with the results.
But, rather than rely purely on our experience, we looked at the stats to see what is happening region-wide.
What did we find?
Homes over 700k represent the fastest growing segment in Kitchener-Waterloo.
When we prorated the Jan-Aug sales over the rest of the year (over the past 3 years, on average, 28% of yearly sales volume occurs from Sep-Dec), we arrived at the following:
Once you hit the 700k mark, the % volume increase vs. 2015 jumps to 76% – and hits 166% in the 900k-1MM range.
AND, they’re selling at the same pace or faster than in 2015:
- 700-800k: no difference (on average)
- 800-900k: 1 day faster
- 900k-1MM: 18 days faster
- 1MM+: 17 days faster
Yes, 700k+ is the smallest segment in our market and it doesn’t take A LOT of volume to result in a large percentage increase. BUT, for the purpose of this argument, volume is increasing much more than in previous years – and these properties are selling faster.
Will this continue?
We will likely see this segment continue to rise dramatically for a couple of reasons:
1) Accelerated Value Shift: If home values continue to rise at a 10% pace, a significant portion of the homes that would sell for 600-700k today will likely sell for 700+ next year. This would typically take 2-3 years.
2) Matter of Proportions: As mentioned above, this segment is the smallest in our market (about 4.1% (projected)). The 500-700k segment makes up 12.3%. There are a lot of homes ready to shift into the 700k range in the coming years.
3) GTA Buyers: Again, we come back to the concept of relative value. An updated 2-bedroom semi in Toronto can go anywhere from 800-900k. To GTA buyers with that kind of money, a beautiful, fully-finished, detached, 3000+ square foot home for 700k in Waterloo looks pretty good. As GTA prices continue to increase at break-neck speeds, more Toronto buyers will be compelled to explore the K-W high-end market. More demand and no significant increase in supply will typically lead to higher prices.
What this means for high-end home owners:
This is great news for those thinking of selling high-end/luxury homes: homes in their segment are moving and, unlike the 300-500k market segment in which there are hundreds of homes to compete with at any given time, their homes have a chance to stand out to qualified buyers in K-W and beyond and fetch top dollar if marketed and positioned property.