Toronto benchmark home prices fell for a fourth-straight month, a record-breaking streak of declines that some economists warn could become an historic downturn in Canada’s real estate market.
(Bloomberg) — Toronto benchmark home prices fell for a fourth-straight month, a record-breaking streak of declines that some economists warn could become an historic downturn in Canada’s real estate market.
The home-price index in Canada’s largest city declined 3.9% in July from the month earlier, bringing the total drop since April to 13.3%, according to data released Thursday by the Toronto Regional Real Estate Board. That’s the worst four-month performance since the measure started being tracked in 2005.
After an unprecedented run-up through the course of the pandemic, Canadian home prices have seen an abrupt reversal since the country’s central bank began aggressively raising interest rates in March to get the highest inflation in four decades under control. That has more forecasters starting to say the pain in real estate is only getting started.
Royal Bank of Canada last month predicted the market is in the midst of a “historic” correction that, by the beginning of next year, will end up being greater than any its seen in the last four decades, and even worse in places that had the biggest booms such as Ontario.
Still, despite Toronto’s recent run of monthly declines, the home-price index is up almost 13% from the same time last year, thanks to the even faster run-up in values that preceded it. Even after the recent drop, Toronto’s benchmark home price of C$1.16 million ($900,000) is now only as high as it was in November, the real estate board data show.
Rising borrowing costs sidelining potential buyers have driven the declines, with sales in the city, on a seasonally adjusted basis, down 7.3% in July from the month earlier, the data show. Last month, the Bank of Canada raised its benchmark interest rate a full percentage point, bringing it to 2.5%, in its biggest one-time move since 1998, while signaling more hikes could come.
The market slowdown is also causing potential sellers to wait. New listings in Toronto were down 2.7% in July from the month before, the data show. Still, with sales falling faster, the total number of homes on the market was still up 3% from June, shifting even more bargaining power to whatever buyers were left.
Similar trends were seen in Vancouver, long Canada’s priciest market, where both sales and new listings fell in July from the previous month, forcing the benchmark home price down 2.3% to C$1.2 million, a separate report Wednesday showed.