Real estate markets in the country’s largest metro areas remained relatively strong in July despite the Bank of Canada’s most recent rate hikes.
Data from some of the key real estate boards show continued year-over-year growth in activity and continued upward momentum in prices.
In Toronto, sales posted a 7.8% year-over-year gain, while in Vancouver they were up nearly 29%.
However, Andrew Lis, the Real Estate Board of Greater Vancouver’s director of economics and data analytics, said part of the strength is due to weaker sales a year ago as interest rates were starting to rise.
“Last July marked the point when the Bank of Canada announced their ‘super-sized’ increase to the policy rate of one full per cent, catching buyers and sellers off guard, and putting a chill on market activity at that time,” he noted.
Still, Lis notes that the current strength is against the backdrop of borrowing rates that are much higher compared to a year ago. “Despite borrowing costs being even higher than last July, sales activity surpassed the levels we saw last year, which I think says a lot about the strength of demand in our market and buyers’ ability to adapt to and qualify for higher borrowing costs,” he continued.
Signs of cooling ahead
On a monthly basis, sales in most markets were down, including in Vancouver (-3%), Toronto (-8.8%), while price gains moderated.
Pressure eased on prices thanks in part to an increase in supply as sellers have started listing homes in greater numbers, particularly in Ontario and British Columbia.
“If sustained, we would expect price gains to continue moderating in the coming months,” noted RBC economists Robert Hogue and Rachel Battaglia.
“Signs of cooling activity in some of Canada’s largest markets are consistent with our view that the spring rebound was premature, and will taper off further amid high interest rates, ongoing affordability issues and a looming recession,” they added. “We think the path ahead is more likely to be slow and bumpy, with the recovery gaining momentum when interest rates come down—a 2024 story.”