Toronto’s unexpected rebound in home prices came to an end last month as back-to-back interest rate hikes by Canada’s central bank helped squeeze buyers out of the market.
(Bloomberg) — Toronto’s unexpected rebound in home prices came to an end last month as back-to-back interest rate hikes by Canada’s central bank helped squeeze buyers out of the market.
The benchmark price of a home in Canada’s largest city slipped 0.1% in August from July to C$1.16 million ($850,000), according to a statement Wednesday by the Toronto Regional Real Estate Board. It was the first decline in six months.
The surge in home prices that broke out in Toronto and other cities earlier this year was cited by the Bank of Canada as one reason it increased rates in June and July. Values had started to climb after the central bank said it would pause its rate-hiking campaign in January, almost immediately prompting buyers to pile back in. Now in Toronto, it appears the latest increases are having the intended effect of cooling demand.
Home sales fell 1% in August from July on a seasonally adjusted basis as mortgage rates reached their highest levels in more than 15 years.
“Many buyers have had to adjust their offers in order to qualify for higher monthly payments,” Jason Mercer, the real estate board’s chief market analyst, said in the statement. “Not all sellers have chosen to take lower-than-expected selling prices, resulting in fewer sales.”
The Bank of Canada is likely to hold interest rates steady at its meeting Wednesday.
Higher borrowing costs may also be pressuring home owners, many of whom have variable-rate mortgages. The number of properties being put up for sale in Toronto rose 1.3% in August, the fifth consecutive monthly gain in new listings, according to the board’s data.
While that increase in supply may have helped push down prices last month, those homes were entering an extremely tight market. Listings so far this year were still lower than in the same period of 2022, the board’s data show.
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