Toronto’s housing market continued to buckle in May 2022 under rising interest rates as home prices and sales slid further in Canada’s most populous city. A home sold in Toronto during May clocked in at $1.21 million averagely, according to data from the Toronto Regional Real Estate Board (TREBB). The price is up a little more than nine percent from a year earlier, but it slid about three percent from $1.25 million in April. It’s the third straight month of price decreases. The article contains Home Prices Drop For Third Straight Month in Canada.
The Bank of Canada’s aggressive interest rate hike path also weighed on the city’s home sales, and the number of homes exchanging hands tumbled nearly 39 percent to 7,283 units in May from the same time last year and nine percent over the month.
“Bank of Canada rate hikes, including the 50-basis-point hike on June 1, are impacting homebuyers in the short term,” TRREB president Kevin Crigger said in a press release. “There is now a psychological aspect where the buyers are waiting for a bottom in price. This will likely continue through the summer. However, as homebuyers adjust to higher borrowing costs, housing demand will be supported by deficient jobless, high job vacancies, increasement of incomes, and record immigration.”
The Bank of Canada raised interest rates by 50 basis points, bringing the overnight rate to 1.5 percent. With inflation running at multi-decade highs, central bank governor Tiff Macklem signaled more increases. The upward pressures on borrowing costs are prompting more would-be homebuyers to sit on the sidelines and assess their options, according to TRREB chief market analyst Jason Mercer. He said those trends have brought more balance to the market and provided buyers with more negotiating power over prices.
TRREB Chief Executive John DiMichele pointed to a persistent supply problem as a long-term challenge confronting housing affordability. He also said it would be up to local policymakers to develop a strategy to construct more supply. During the Ontario provincial election, the Progressive Conservatives secured a majority for the second time. The party promised to provide the province’s 39 largest municipalities with new funding to streamline development approvals and build more homes.
Toronto is not alone in its housing market slowdown. Other cities such as Vancouver and Calgary are seeing the impact of higher rates bite into housing demand, with prices and sales slipping further in May.
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