mortgage rates

Toronto real estate market stagnates due to soaring mortgage rates

According to the latest real estate market information, last month, prospective homebuyers in the Greater Toronto Area (GTA) continued to grapple with affordability challenges and economic uncertainty due to high mortgage rates.

This situation had a direct impact on housing market dynamics, leading to a decline in sales compared to the previous year. Despite these obstacles, selling prices in the GTA housing market remained elevated when contrasted with levels observed in the previous year.

“Record population growth and the relatively robust GTA economy have sustained substantial housing demand. However, a significant portion of this demand has shifted towards the rental market,” said Paul Baron, president of the Toronto Regional Real Estate Board (TRREB). “High borrowing costs and the uncertainty surrounding the trajectory of interest rates have deterred many potential homebuyers from entering the market in the short term. Once mortgage rates begin to trend downwards, we anticipate a swift resurgence in home sales.”

According to data provided by TRREB a total of 4,646 home sales were reported through the MLS® System in October 2023. This figure marked a 5.8 percent decrease in comparison to the same month in 2022. Additionally, on a month-over-month basis, seasonally-adjusted sales figures exhibited a decline when compared to September.

In terms of new listings, October 2023 witnessed a notable increase in comparison to the 12-year low recorded in October 2022. However, the surge was more modest when contrasted with the 10-year average for October. On a seasonally-adjusted basis, new listings experienced a slight dip month-over-month when compared to September 2023.

October 2023 showcased an upswing in the MLS Home Price Index Composite benchmark and the average selling price on a year-over-year basis, registering increases of 1.4 percent and 3.5 percent, respectively. While the seasonally adjusted HPI composite benchmark saw a minor decline in comparison to September 2023, the average selling price remained relatively stable.

“Persistent competition among buyers has been a driving force in maintaining the average selling price above last year’s levels in October, preventing a return to the cyclical lows experienced in the first quarter of this year,” said Jason Mercer, TRREB chief market analyst. “The Bank of Canada acknowledged this resilience in its October statement. Nonetheless, home prices still remain considerably below their record peak reached at the beginning of 2022, which has helped offset the impact of higher borrowing costs to some extent.”

John DiMichele, TRREB CEO, explained that high mortgage rates are problematic in the current environment.

“In the current environment of extremely high borrowing costs, it is disappointing to see that there has been no relief for uninsured mortgage holders reaching the end of their current term,” DiMichele explained. “If these borrowers want to shop around for a more competitive rate, they are still forced to unrealistically qualify at rates approaching eight per cent. Following their most recent round of consultations, the Office of the Superintendent of Financial Institutions should have eliminated this qualification rule for those renewing their mortgages with a different institution.”