Rising interest rates, inflationary pressures and widespread economic uncertainty are chilling Vancouver’s luxury real estate market, according to a new report.

Sotheby’s International Realty Canada has found that both high-end buyers and sellers are choosing to sit on the sidelines in the country’s major cities, causing both demand and supply to dry up.

“Traditional and luxury real estate markets in Canada are undergoing a long-awaited transition after a period of overexuberance during the pandemic, especially in those regions that have seen the greatest acceleration over the past two years,” a Don Kottick, president and CEO, said in a news release summarizing the report’s findings.

“The market is still absorbing the effects of rapid-fire interest rate hikes, as well as changes in the domestic and global economic landscape, and real estate sellers and buyers are taking a step back to strategize.”

In Vancouver, sales of properties listed for more than $4 million fell 51 percent year-over-year in July and August, and fell 58 percent in September. The report, however, characterized last year’s activity as “unsustainable,” “frenetic,” and “exceptionally exuberant,” and described the decline as an indication that this segment of the market is normalizing.

The city remains, the report says, one where the housing market is under pressure from “affordability challenges,” which are getting worse as the cost of living continues to rise. However, even people looking to buy or sell multi-million dollar properties are being discouraged by rising interest rates and inflation.

“Despite the financial resilience of more luxury and ultra-luxury buyers and investors to absorb the impact of rising interest rates and inflationary pressures, many are temporarily on the sidelines in anticipation of future price reductions,” it reads he.

“At the same time, the reluctance of many sellers to list and sell properties at prices appropriate for the new market realities makes it a widely viewed temporary period of price and activity stickiness as buyers and sellers adapt to new norms. .”

The full report is available online.

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