Phil Kessel scores one last time in Toronto

The former right winger finally sold his luxury College Park condo—for half a million less than the listed price

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Looks like Phil Kessel, who vacated his spot as the Maple Leafs’ temperamental right winger last year, is officially no longer a Toronto condo-owner.

As reported in the Toronto Star, Kessel just finalized the sale of his 5,000 square foot condo apartment—selling it for 85% of the $3.38 million initial list price. (Watch the video above for a virtual tour of the place.) So, should Kessel be worried about the $565,000 loss? Does this mean home sellers can expect a drop in prices this year? It’s a definitive “no” to both questions. Here’s why.

Different buyers

It’s not just the price tag, space or amenities that set luxury properties apart, it’s also the type of buyer that is attracted to these properties. International demand has a much larger impact on luxury market sales, explains Jonathan Smoke, chief economist at U.S.-based Realtor.com. While middle-class Canadians may be worried about mortgage rates, land-transfer taxes and rising home prices, luxury home buyers are more concerned about safe investment environments and ways to maintain or create more wealth.

International slowdown in luxury sales

But this alternative approach to buying high-priced property also means that the luxury real estate market is subject to more international economic factors. This can translate into a market segment that is slowing, even when the rest of the market is peaking.

This would also explain the slowdown in luxury home sales, despite record breaking real estate deals prices coming out of Toronto and Vancouver. Estimates from Realtor.com show a decline in international sales of luxury properties by as much as 12% in 2015, when compared to year-over-year data. And in a recent report from Knight Frank, a London, UK-based luxury real estate firm, luxury home prices for the world’s major cities are expected to slow by nearly half this year, from 3% in 2015 to 1.7% in 2016. Lack of demand means a drop in prices regardless of which market segment you’re in.

Reasons for slowdown

The biggest reason for the worldwide decline in luxury property sales is China’s economic slowdown, explains Liam Bailey, head of research at Knight Frank. This decrease in productivity has meant slower wealth creation and this has translated into fewer international luxury purchases by wealthy Chinese buyers.

Still, that doesn’t mean luxury real estate buyers are gone. The top global luxury market, Sydney, Australia, is once again expected to top the list in 2016, even with a reduced luxury market forecast growth of only 10% this year (down from 15% in 2015).

Luxury properties also move at their own pace. While a home seller in Toronto may balk at the idea of a property taking 60 days or more to sell, luxury property owners know that this is just part of doing business. In San Francisco, for example, a US$1 million+ home sells, on average, in 71 days. In Paris, France, the average days on the market for luxury listings increases to 170 days, and in Hong Kong, the world’s priciest real estate market, luxury listings sit on the market, on average, for 225 days.

But luxury home sellers shouldn’t fear the worst. While China’s slowdown is certainly tempering wealth creation, this economic uncertainty could also drive more money out of the country and into overseas markets, says Bailey. The rich will look for safe investments and better returns and that means “more demand for money moving outside of China,” he says.

Definition of a luxury property

Sotheby’s, another luxury global real estate firm, defines the high-end market as anything that sells for more than $4-million—and sales for properties in this range were up 67% in Vancouver and 71% in Toronto in 2015.

Still another luxury home analyst, the Institute for Luxury Home Marketing (ILHM), defines luxury properties as those listed at US$1.5-million or more. According to the April 2016 report by the ILHM, which analyzed data on 22,959 luxury homes, the average number of days a luxury home sits on the market is 161 days, and the average price per square foot is $404. The most interesting statistics, however, is the ILHM’s Market Action Index, which measures the supply of luxury properties to the current level of demand. According to this Market Action Index, the worldwide luxury market is in a buyer’s market—which could explain why Kessel had to accept an offer that was half-a-million below his asking price.

Kessel bought the place in 2009 for $3.15 million. He sold it this month for $3.325 million, $565,000 below the asking price. This is what he sold:

→ luxury College Park condo
→ 5,000 square foot apartment
→ Property taxes: $15,000
→ features:

*3 + 1 bedrooms
*5 walk-outs to a wrap-around terrace overlooking panoramic skyline views
*2 separate terraces
*10-ft. Ceilings
*custom-controlled sunshades
*cornices and coffered ceilings throughout
*custom family room with a media wall and a surround sound entertainment system
*6-pc spa-like master bath
*chef’s kitchen with granite, marble and limestone
*private two-car garage

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