Real estate markets in Toronto and Vancouver slumped further in July, as sales and home prices fell for another month as mortgages became more difficult to obtain and buyers waited to see how prices might drop.
In the Toronto area, home resales were down 47 percent in July from the same month a year ago, and down 7.3 percent from June on a seasonally adjusted basis, according to the Toronto Regional Real Estate Board (TRREB). In the Vancouver area, resales are down 43 percent year over year and were 23 percent lower than in June, according to the Greater Vancouver Real Estate Council.
Home prices also continued to fall in the country’s two most expensive markets.
The Home Price Index, which adjusts for the higher end of the market, fell for the fourth consecutive month in the Toronto area. The home’s usual price was $1,157,500 in July, down 13 percent from its peak in March and the biggest drop in four months since the turn of the century.
In the Vancouver area, home prices fell for the third consecutive month to $1,207,400. That’s 12 percent lower than Vancouver’s highest market in April.
Prices are dropping across the board,” said Brendon Cowans, vice president of sales at Property.ca, a Toronto-based brokerage.
In the Toronto area, the home price index fell 4 percent from June to July, with the largest drop outside the city. Home prices fell rapidly in areas that experienced steep price increases in the first two years of the pandemic. This includes Halton, west of Toronto, where the house price index fell 6 percent from June to July.
Toronto developers expect 10,000 units to be delayed as slowdown hits pre-sale apartments
In the Vancouver area, the typical price of a home fell 2.3 percent over the same period. The typical detached home fell 2.8 percent to $2,000,600 in the June-July period. Semi-detached homes fell 1.7 percent to $1,096,500 over the same period and apartments fell 1.5 percent to $755,000.
Mr. Cowens said the market has moved in favor of buyers and expects prices to continue lower as the Bank of Canada raises interest rates to help slow inflation.
Farah Omran, an economist at Bank of Nova Scotia, said more people are now expecting lower prices. “Buyers are increasingly feeling less impulsive and being late to buy cheaper price tags,” she said in a recent research note.
As a result, it takes longer for homes to sell. In the Toronto area, active listings have increased 58 percent over the past year. In the Vancouver area, the volume of listings was up 4 percent year over year.
The central bank’s benchmark interest rate is now 2.5 percent, compared to 0.25 percent in early March. This has increased borrowing expenses for homeowners with a variable mortgage rate and made it difficult for potential buyers to qualify for a loan.
Prospective homebuyers must demonstrate their ability to make their mortgage payments at an interest rate of at least two percentage points higher than the mortgage rate. With the five-year fixed rate of interest near 5 percent, this means that borrowers must demonstrate their ability to make their payments at an interest rate of around 7 percent.
TRREB said this massive increase in lending rates has changed the sentiment in the market. Chairman Kevin Krieger urged the federal government to reassure homeowners that they would be able to stay in their homes despite the high cost of borrowing.
“The federal government has a responsibility not only to maintain confidence in the financial system, but to instill confidence in homeowners,” he said in a press release. The board urged policy makers to consider extending the mortgage amortization period to 40 years from the current 25 years.
Overall, property values are still higher than they were a year ago. In the Vancouver area, the typical price of a home is up 10 percent year over year. In the Toronto area, the home price index was 13 percent higher.
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