The price of a resale home in Canada fell 1.8 per cent in June from last year, the first annual decline since May 2020, as the market continued to cool sharply from February’s peak amid tighter borrowing conditions, data from Canada’s realtors showed Friday.
Canada’s national average selling price fell to C$665,850 ($511,092) in June from C$678,280 in the same month of 2020, data from the Canadian Real Estate Association showed. Prices are down 6.4 per cent on the month and down 18.5 per cent from February’s peak.
“The June housing data show a market seriously wobbling, and that was before the Bank of Canada’s 100-bp (basis point) knockout blow,” said Robert Kavcic, senior economist at BMO Economics, in a note, adding an even deeper correction is yet to come.
The Bank of Canada surprised with its jumbo-sized increase on Wednesday, lifting the policy rate to 2.5 per cent from 1.5 per cent. It has hiked four times this year in an effort to tame hot inflation, with money markets betting on rates hitting 3.5 per cent by year-end.
Home sales in Canada fell 5.6 per cent in June from May and are down 23.9 per cent year-over-year, led by Canada’s largest cities, the CREA said.
“Sales activity continues to slow in the face of rising interest rates and uncertainty,” said Jill Oudil, chair of the CREA. “The cost of borrowing has overtaken supply as the dominant factor affecting housing markets at the moment.”
The frenzy of the start of 2022 has faded, with sales down 19 per cent in the second quarter from the first. New listings rose 4.1 per cent in June and the sales-to-new listing ratio eased to its lowest level since 2015.