A housing correction, which has already led to four straight months of price declines in the previously overheated Greater Toronto market, could end up becoming “one of the deepest in half a century”, a new report warns. of RBC.
New data published by the Toronto Regional Real Estate Board (TRREB) last week revealed that the median listing price for a home in the GTA fell six percent month over month in July to $1,074,754.
Sales also fell a staggering 47 percent from July 2021.
in a report Posted Aug. 4, RBC Senior Economist Robert Hogue said recent data from real estate boards underscores that higher interest rates are starting to take a “big toll” on the market.
Hogue said that with more increases to come, prices are likely to continue falling in the coming months.
It should be noted that that prediction runs counter to a Royal LePage report last month that painted a more optimistic forecast for sellers whose values would remain more or less during the rest of the year after some falls in the second quarter.
“Our expectations of more hikes by the Bank of Canada (another 75 basis points for the overnight rate in the fall) will continue to freeze the market in the coming months,” Hogue said. “We expect the recession to deepen and spread further as buyers take a wait-and-see approach as they check the impact of higher interest rates. Canada’s least affordable markets, Vancouver and Toronto, and their surrounding regions, are most at risk due to their overly stretched affordability and outsized price gains during the pandemic.”
The Bank of Canada has raised the interest rate on overnight loans by 225 basis points since March and has warned that further increases will be necessary as inflation remains at a nearly 40-year high.
In his report, Hogue noted that the housing correction “is now sweeping across Canada,” but said it is particularly pronounced in the pricier markets of Toronto and Vancouver.
In fact, Hogue said Toronto home resale activity is at its slowest pace in 13 years, outside of the early days of the COVID-19 pandemic.
The stock of available homes was also up 58 percent from a year earlier, he noted.
“With more options to choose from and higher interest rates reducing their purchase budgets, buyers can get significant price concessions from sellers,” he said, noting that the median home price in the GTA is down 13 per cent. since March. . “We expect buyers to remain defensive in the coming months as they grapple with rising interest rates and poor affordability.”
While Hogue said condos in the city of Toronto are likely to remain “relatively more resilient,” he said prices elsewhere will continue to fall for the time being, especially in the 905 belt “where property values have skyrocketed.” during the pandemic.”
The data for July TRREB suggested the median home price in the GTA was still up one percent from July 2021.