Benchmark home prices in Toronto have fallen for a fourth straight month, a streak of record lows that some economists say could become a historic downturn in the Canadian real estate market.
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(Bloomberg) – Benchmark home prices in Toronto have fallen for a fourth consecutive month, a streak of record declines that some economists say could become a historic downturn in the Canadian housing market.
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The house price index in Canada’s largest city fell 3.9% in July from the previous month, bringing the total drop since April to 13.3%, according to data released Thursday by the Toronto Regional. Real Estate Board. It’s the worst four-month performance since the metric began tracking in 2005.
After an unprecedented surge during the pandemic, Canadian home prices have seen a sharp reversal since the country’s central bank began aggressively raising interest rates in March to rein in the highest inflation. in four decades. More and more forecasters are starting to say that the real estate pain is just beginning.
Royal Bank of Canada predicted last month that the market is in the midst of a “historic” correction that by early next year will end up being bigger than anything it has seen in the past. over the past four decades, and even worse in places that had the biggest booms like Ontario.
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Yet despite Toronto’s recent string of monthly declines, the home price index is up nearly 13% from the same time last year, thanks to even faster rising values that have pushed it up. preceded. Even after the recent drop, Toronto’s benchmark home price of C$1.16 million ($900,000) is now as high as it was in November, according to Real Estate Board data.
Rising borrowing costs driving away potential buyers drove the declines, with sales in the city, on a seasonally adjusted basis, down 7.3% in July from a month earlier, the data showed. Last month, the Bank of Canada raised its benchmark interest rate by one percentage point, to 2.5%, in its largest one-off step since 1998, while signaling that further hikes could occur.
The slowing market is also keeping potential sellers waiting. New listings in Toronto fell 2.7% in July from the previous month, the data showed. Still, with sales falling faster, the total number of homes on the market was still up 3% from June, transferring even more bargaining power to remaining buyers.
Similar trends were seen in Vancouver, long Canada’s most expensive market, where sales and new listings fell in July from the previous month, forcing the benchmark home price down 2. 3% to C$1.2 million, according to a separate report released Wednesday.
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