The housing correction that has already led to four straight months of price declines in the previously overheated market in the Toronto area could become “one of the deepest in half a century,” warns a new RBC report.
New data released by the Toronto Regional Real Estate Board (TRREB) last week revealed that the average benchmark home price in the GTA fell six per cent month-over-month in July to $1,074,754.
Sales are also down a staggering 47 percent from July 2021.
In a report published on August 4, RBC senior economist Robert Hogue said the latest data from real estate boards highlighted that higher interest rates were starting to have a “huge impact” on the market.
Hogue said that with further increases to come, prices are likely to continue to fall in the coming months.
That forecast, it should be noted, contradicts a report from Royal LePage last month that painted a rosier outlook for sellers, with values more or less holding steady through the end of the year after some dips in the second quarter.
“Our expectations of further hikes from the Bank of Canada — another 75 basis points due in the overnight rate by the fall — will continue to cool the market in the coming months,” Hogue said. “We expect the downturn to intensify and spread further as buyers take a wait-and-see approach while they assess the impact of higher lending rates.” Canada’s least affordable markets of Vancouver and Toronto and their surrounding regions are most at risk in light of their overextended affordability and excessive price gains during the pandemic.”
The Bank of Canada has raised its overnight lending rate by 225 basis points since March and warned that further increases will be needed as inflation remains at a near 40-year high.
In his report, Hogue noted that the housing correction “is now spreading across Canada,” but he said it was particularly pronounced in the pricier markets of Toronto and Vancouver.
In fact, Hogue said home resale activity in Toronto is at its slowest pace in 13 years, outside of the early days of the COVID-19 pandemic.
The stock of available housing is also up 58% from the previous year, he noted.
“With more choices and higher interest rates squeezing their purchase budgets, buyers can extract significant price discounts from sellers,” he said, noting the GTA’s median home price was down 13 percent from March . “We expect buyers to remain on the defensive in the coming months as they deal with rising interest rates and low affordability.”
While Hogue said apartments in the city of Toronto are likely to remain “comparatively more resilient,” he said prices elsewhere will continue to fall for now, particularly in the 905 belt “where property values have jumped during the pandemic “.
TRREB data for July shows that the median home price in the GTA is still up one percent from July 2021.
Add Comment