Expected rate increases later this year will reverberate through the market
Toronto’s record-breaking surge in home prices is likely coming to an end soon amid expected rate hikes by the Bank of Canada this year, according to the region’s real estate industry association.
This is despite the market’s 6.9% monthly home price gain in January, reaching an average selling price of $1.24 million.
The January upswing was the largest monthly gain in almost five years, but the Toronto Regional Real Estate Board said that selling prices are already plateauing and will average $1.23 million this year.
“Definitely as we move through the year, it’s possible we’ll see average prices below that January mark,” said Jason Mercer, chief market analyst at the TRREB. “There’s going to be changes in the marketplace that will likely influence demand. Higher borrowing costs will be one of those.”
Read more: Canada housing market in a ‘speculative fever’ – regulator
The central bank kept its benchmark rate at 0.25% in its latest meeting on Jan. 26, but it admitted that interest rates “will need to increase” to counteract Canada’s mounting inflation levels. Market observers have pegged at least six 0.25% increases over the next year, pushing the policy rate to 1.75%.
However, TRREB is not expecting large price declines, considering the region’s persistently scarce supply of homes for sale. As of the end of January, only 4,140 listings are still active in Toronto, a level that the TRREB says will keep prices steady overall.
