Home-sales activity slowed to a crawl in Canada’s largest city in December, with just 3,117 homes trading hands to end a year that saw prices decline by a record amount.
(Bloomberg) — Home-sales activity slowed to a crawl in Canada’s largest city in December, with just 3,117 homes trading hands to end a year that saw prices decline by a record amount.
The benchmark price of a home in Toronto fell 0.8% in December from the month before to C$1.08 million ($797,000), not adjusted for seasonality, according to the city’s real estate board.
That brought the one-year price decline to 8.9%, the biggest drop for a calendar year since the benchmark was first compiled in 2005, the data show. Prices are down 19% since March.
Just as ultra-low pandemic interest rates triggered a home-buying frenzy in 2021, a sharp rise in borrowing costs turned the market in the opposite direction in 2022. With similar trends playing out from Sweden to New Zealand, Toronto now finds itself in the vanguard of a global housing downturn that is being driven by interest rates.
Housing prices in Toronto and other Canadian cities may come under more pressure in 2023, with inflation still running near 7% and the central bank signaling that it might not be done hiking rates.
Higher mortgage costs have already forced many potential buyers to the sidelines in Toronto, causing the number of sales to fall 48.2% in December from the same period last year when the market was approaching its peak. New listings have also fallen, but at a slower rate, the real estate board said.
‘Flatline’ Signal
Still, with Canada’s population growing at its fastest pace in decades thanks to high levels of immigration, many observers expect the housing market to stabilize. Some of the data from Toronto suggest that process may have already begun. The average selling price — which is considered more volatile and less reliable than the benchmark price — was flat in December compared with November, on a seasonally-adjusted basis.
Sales in December were similar to October and November on a seasonally-adjusted basis.
“It’s started to flatline a little bit, and if that continues into the first half of 2023, it could signal a bit of a bottom in this cycle,” Jason Mercer, chief market analyst with the Toronto Regional Real Estate Board, said on BNN Bloomberg Television.
Even with its declines over the past nine months, Toronto’s benchmark home price is still nearly 37% higher than three years ago.
With transaction activity thin during Canada’s winter season, it’s harder to establish durable trends. The real test may come with the warmer weather that typically draws out more buyers and sellers in the spring.
“As we look forward into 2023, there will be two opposite forces impacting the housing market,” John DiMichele, chief executive officer of the real estate board, said in a press release accompanying the data. “On the one hand, we will continue to feel the impact of higher borrowing costs. On the other hand, record levels of immigration will support demand for ownership and rental housing.”
–With assistance from Erik Hertzberg.
(Updates with global context and historical prices)
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