A recent Re/Max upper-end survey reported that luxury home sales were up in
twelve of the thirteen markets studied from January to May, 2006, as
compared to one year ago.

Why are million dollar homes such a craze today?

There are a couple of factors that have significantly contributed to the
escalation in sales in this price bracket. Firstly, many individuals are
taking advantage of the tremendous equity gains in the real estate market,
and selling their current homes to invest their profits in the high-end
market.

Furthermore, consumer confidence levels are very high today and consequently
buyers aren't apprehensive about taking on larger amounts of debt. This
goes hand in hand with the strong economic performance that is being
witnessed from coast to coast in Canada.

Lastly, even though there is a greater supply of $1 million dollar homes on
the market, there is still limited inventory of these luxury homes in the
desirable neighbourhoods, putting upward pressure on prices.

Two factors that have significantly contributed to higher home prices are major
renovations (totally remodeled kitchens, for example, with expensive
appliances, fixtures, cabinets and countertops) and the rising values in
real estate.

Today, there is a record level of in-fill housing occurring in the majority of the
older, well-established communities. In-fill housing is defined as properties being purchased with older homes which are being torn down and new upscale homes are being built. This has created newer upper-end enclaves which are obtaining top dollars.

Also, more and more Canadians are achieving a level of affluence that's
reflected in the homes they choose to live in. Young professionals,
corporate executives and entrepreneurs are helping fuel the market for
upscale homes and condominiums.

Oakville, for example, has seen an "explosion" in luxury homes, particularly
around the exclusive and limited Lake Ontario waterfront. Oakville, interestingly, has the highest per capita income in the country.

The luxury market has skyrocketed so much that it is being redefined. It
has become exceedingly more difficult in Toronto to purchase a luxury home
for $1 million dollars, and hence the entry point of a so-called luxury home
is now classified as a property with a price tag of $1.5 million, or
greater. Even with this new definition, there were 289 properties in the
city that sold above this price between January and May of 2006. This
represents an increase of more than 30% from the same period one year ago.

And personally, while Team McDadi sells and buys homes in all of the price
ranges (from single-bedroom condos and affordable townhomes to executive and
luxury homes), our sales of homes in the upper price-range have also
escalated.

As this segment of the market continues to grow, it begs the question of how
long its growth can continue.

My thoughts are if you are contemplating entering this sector of the market, don't
over leverage yourself. As long as you are confident that you can
comfortably afford to manage your finances if the market turns, than there
can be the further advantage (in addition to the obvious lifestyle benefits)
of building considerable equity in a flourishing market. However, keep in
mind that we are enjoying extraordinary economic prosperity. The real estate
market does run in cycles.