Toronto home prices decrease in May, 2022 for three straight months while interest rates rise
Toronto’s housing market continued to buckle in May, 2022 under the weight of rising interest rates as home prices and sales slid further in Canada’s most populous city.
The average price of a home sold in Toronto during May, 2022 clocked in at $1.21 million, according to data from the Toronto Regional Real Estate Board (TREBB). The price is up a little more than nine (9) per cent from 2021, but it slid about three (3) per cent from $1.25 million in April. It’s the third straight month of price decreases.
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 per cent to 7,283 units in May from the same time last year and nine per cent month over 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 potential 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 extremely low unemployment, high job vacancies, rising incomes and record immigration.”
The Bank of Canada raised interest raised interest rates by 50 basis points this week, bringing the overnight rate to 1.5 per cent. With inflation running at multi-decade highs, central bank governor Tiff Macklem signalled more increases to come.
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 this week, the Progressive Conservatives secured a majority for the second time. The party ran on a platform that 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, 2022.
Source: Financial Post
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