Real estate slowdown in Toronto, Vancouver continues, as prices fall from pre-rate hike highs
Average selling price in Greater Toronto Area has fallen by 14 per cent since February
The slowdown underway in Canada's two most expensive housing markets continued in June, with new numbers showing the number of homes sold in Toronto and Vancouver fell by more than a third, and average prices have now declined for several months in a row.
The Toronto Regional Real Estate Board (TRREB) said 6,474 homes were sold in the Greater Toronto Area last month, down by 41 per cent compared with last June.
As was the case in many parts of Canada, house prices in and around Toronto exploded during the COVID-19 pandemic, as record-low interest rates allowed buyers to stretch their budgets to buy more expensive homes. But that trend changed direction abruptly in March of this year, when the Bank of Canada started to hike interest rates.
The impact on the market was almost immediate, as sales and new listings slowed, and the bidding wars that were once commonplace began to vanish, as buyers could afford to be choosier.
"Home sales have been impacted by both the affordability challenge presented by mortgage rate hikes and the psychological effect wherein homebuyers who can afford higher borrowing costs have put their decision on hold to see where home prices end up," TRREB president Kevin Crigger said. "Expect current market conditions to remain in place during the slower summer months."
There's also a slowdown on the price side, although it's not as pronounced as the one underway on the volume side.
The average price of a home that sold during the month was $1,146,254. That's up by five per cent compared with the same month a year ago, but it has steadily fallen for four months in a row.
The average selling price is down by 14 per cent from the peak of more than $1.3 million reached in February.
Lower prices are welcome news for buyers, but that doesn't mean things are necessarily getting more affordable.
Kriti Bhardwaj and her husband, Sachin Advani, have been on the sidelines of the market for a few years, looking for a chance to buy in. But even as they see asking prices decreasing, they are noticing that the rate they would have to pay on any new mortgage is increasing even faster, keeping many homes out of their reach.
"I think it's a gradual process, and maybe it'll take a few more months to see a significant decrease as compared to how significant the [price] increase was back in 2021," Bhardwaj said.
"[But] everything's cooling down," she said. "There are more properties on the market and there are less number of buyers."
Slowdown in Vancouver, too
It's a similar story on the other side of the country as sales in Vancouver fell by 35 per cent compared with last year's level, although prices so far are holding up a little better.
The benchmark selling price in Greater Vancouver came in at 1,235,900 for the month, up by 12 per cent compared to last year but down by more than two per cent over the past three months.
Realtor Steve Saretsky said there's been a "pretty significant change in direction," since February, especially in suburban communities outside the city's downtown — where prices ran up the most when work-from-home arrangements were de rigueur.
"Anything that's an hour plus out of the city is seeing the largest decline, but arguably they also went up the most," he told CBC News in an interview.
Saretsky said higher interest rates have kicked off a correction in the city's overheated housing market, but it's important to remember that price declines are only coming down from their unsustainable peaks.
"Those were really just kind of fictitious prices that people [had a] fear of missing out and overpaying, competing with 10 plus other people on some of these homes."