Toronto home prices are tanking as people abandon the turbulent market

Buyers are pulling away from Toronto’s real estate market, new home prices are on the decline, and experts are pinning the blame, at least in part, on continued interest rate hikes by the Bank of Canada.

The Building Industry and Land Development Association (BILD) announced on Monday that the Greater Toronto Area (GTA) new home market experienced declining prices in June, while sales fell well below the 10-year average.

The 2,526 new homes sold in June actually marked a 32% increase year-over-year, and a slight bump over the 2,391 homes sold the month before. However, these short-term gains weren’t enough to chip away at the longer-term issue, as sales still sit a worrying 30% below the 10-year average in sales for June.

Condos, stacked townhomes, and lofts represented the majority of these sales, accounting for over 1,950 units. Similarly, a generous year-over-year increase of 11% was overshadowed by a 21% dip below the 10-year average.

Just shy of 570 single-family homes were sold region-wide in June, and here’s where the numbers get really wonky: New houses sold in June were up a stratospheric 256% year-over-year, but still managed to sit a shocking 49% below the 10-year average for that month.

You might also like:
• You now have to make more than double minimum wage to afford rent in Toronto
• Unexpected interest rate hikes put a damper on Canada's home sales forecast
• Tenant who felt threatened by landlord sued for moving out without notice

A decline in sales — at least using long-term metrics — coupled with a spike in inventory (up to almost 16,400 units) has had what BILD describes as “a softening impact on prices.”

The benchmark price for new condo apartments shrank by 8.4% year-over-year in June to $1,090,494, while the benchmark price for new single-family homes dropped by 6.9% to $1,716,467 during the same period.

Dave Wilkes, BILD president and CEO, says that “There is no doubt that the recent escalation in interest rates is pushing some prospective new home buyers to the sidelines,”

“Rising interest rates also delay the addition of much-needed supply to the market, because pre-construction sales are a crucial element in financing new housing. Thus, when the Bank of Canada continually raises interest rates, it is exacerbating Canada’s housing supply and affordability crisis.”