Toronto home prices have fallen 'substantially,' RBC says. This is when they could bottom out
Activity in Toronto’s housing market appears to be levelling off following a sharp decline over the spring that saw home prices drop significantly.
But a new national report from RBC suggests that property values in the city and across Canada are still falling, albeit at a slower pace.
- Download our app to get local alerts on your device
- Get the latest local updates right to your inbox
“Nationwide, our view is that that benchmark prices will fall 14 per cent from peak to trough and probably a bit more in Ontario,” RBC Economist and report author Robert Hogue told CTV News Toronto in an interview.
The data shows that activity in the Toronto area real estate market was generally flat from July to September with 63,000 to 69,700 resales taking place during that time. The report’s preliminary estimate for the month of October sits at 62,600.
Compared to the February peak that saw 110,800 resales, Hogue said Canada’s rising interest rates have “clearly” turned down the temperature on both demand and supply and the “excesses” of an overheated Toronto market are burning off.
“We're seeing that in prices that are coming down quite substantially, and will continue to do so,” Hogue said.
The Bank of Canada has raised interest rates six times already this year and is expected to announce another hike in December in an effort to fight inflation.
Since the first hike in March, the MLS’ Home Price Index (HMI), which Hogue describes as a “pure measure of a property’s value,” for the Toronto area has fallen 18 per cent
That means a home purchased in February is now worth roughly $230,000 less on average.
A for sale sign is shown in front of west-end Toronto homes Sunday, April 9, 2017. THE CANADIAN PRESS/Graeme Roy
But when exactly will prices bottom out and could that be the time to get into the market as a first-time home buyer?
According to Hogue, spring 2023 will be time to watch as it could “open some doors” to buyers who have been waiting on the sidelines.
“At that point, we would expect to see affordability start to improve given, hopefully, by then, interest rates will have reached their peak and the big declines in prices will start to flow through better affordability,” he said.
“Downward pressure on prices will persist for the time being [in the Greater Toronto Area]. And, in our view, the way to alleviate, at least partly some of the affordability problem, is prices have to fall, so we have prices continuing to fall until the spring.”
At the same time, and despite interest rates being the highest they’ve been in more than a decade, Hogue’s report suggests the market hasn’t witnessed what he described as a “distressed selling wave.”
"Delinquency rates remain exceptionally low. And for sure, there is some tension building with higher rates, especially for those with variable mortgages, based on tremendous increase in the interest rates.
“This could potentially lead to trouble for some, but at this point, we're not seeing this,” he said.
Hogue went on to say the federal government’s stress test—a tool used to cool down an overheated housing market—will help prevent a “critical mass” of homeowners selling off.
The newest iteration of the stress test went into effect in June of 2021 and sees uninsured mortgages set at either the mortgage contract rate plus two per cent or 5.25 per cent (whichever is greater) in order to make sure a homeowner can afford to pay off their house.
CTVNews.ca Top Stories
Indian envoy warns of 'big red line,' days after charges laid in Nijjar case
India's envoy to Canada insists relations between the two countries are positive overall, despite what he describes as 'a lot of noise.'
Former homicide detective explains how police will investigate shooting outside Drake's Bridle Path mansion
Footage from dozens of security cameras in the area of Drake’s Bridle Path mansion could be the key to identifying the suspect responsible for shooting and seriously injuring a security guard outside the rapper’s sprawling home early Tuesday morning, a former Toronto homicide detective says.
Stormy Daniels describes meeting Trump during occasionally graphic testimony in hush money trial
With Donald Trump sitting just feet away, Stormy Daniels testified Tuesday at the former president's hush money trial about a sexual encounter the porn actor says they had in 2006 that resulted in her being paid to keep silent during the presidential race 10 years later.
Alcohol believed to be a factor in boating incident after 2 men die: N.S. RCMP
Two Nova Scotia men are dead after a boat they were travelling in sank in the Annapolis River in Granville Centre, N.S., on Monday.
Northern Ont. woman makes 'eggstraordinary' find
A chicken farmer near Mattawa made an 'eggstraordinary' find Friday morning when she discovered one of her hens laid an egg close to three times the size of an average large chicken egg.
Susan Buckner, who played spirited cheerleader Patty Simcox in 'Grease,' dead at 72
Susan Buckner, best known for playing peppy Rydell High School cheerleader Patty Simcox in the 1978 classic movie musical 'Grease,' has died. She was 72.
Jeremy Skibicki has 'uphill battle' to prove he's not criminally responsible in Winnipeg killings: legal analysts
Accused killer Jeremy Skibicki could have a challenging time convincing a judge that he is not criminally responsible for the deaths of four Indigenous women, a legal analyst says.
Bye-bye bag fee: Calgary repeals single-use bylaw
A Calgary bylaw requiring businesses to charge a minimum bag fee and only provide single-use items when requested has officially been tossed.
CFL suspends Argos QB Chad Kelly at least nine games following investigation
The CFL suspended Toronto Argonauts quarterback Chad Kelly for at least nine regular-season games Tuesday following its investigation into a lawsuit filed by a former strength-and-conditioning coach against both the player and club.