Borrowing costs

Toronto home price rise slows in March as borrowing costs rise

Home prices in Toronto hit a new high in March, but the pace of price increases has begun to slow across the region.Graeme Roy/The Canadian Press

Home prices in Toronto hit another record high last month, but the pace of price increases has begun to slow in the region as borrowing becomes more expensive.

The home price index, which adjusts for price volatility and is the industry’s preferred measure of home value, hit a record high of $1,376,000 in March, according to the Toronto Regional Real Estate. Board, or TRREB. This is a 2.7% increase from February and the lowest monthly increase since September. From January to February, the house price index increased by 6.4% and by 4.3% during the December period.

Much of the pandemic’s housing boom has been driven by aggressive competition from homebuyers for properties in suburban and semi-rural areas, where prices are relatively cheaper than the city of Toronto. Areas like Durham, to the east of the city, and Peel, to the west, rose by around 40% in the 12 months to March. Halton is up about 30%.

But from February to March, the Halton home price index fell 2% to $1,475,100 after rising 7% from January to February. In Durham, the price index climbed 2% last month, after jumping 8% in the January-February period.

“The pool of willing buyers could be smaller this year,” said the board’s chief market analyst, Jason Mercer. “This type of trend, if sustained, can result in a slower pace of price growth.”

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In the Toronto area, the country’s largest real estate market, there were nearly 11,000 home resales last month. It was higher than February, but 18% below March of last year.

“If we take sales as an indicator of demand, we can say demand is down from last year,” said Mercer, who attributed the change in part to higher borrowing costs. . Because last year’s sales were so high, he said it suggested some buyers had bought their homes earlier than expected.

Fixed mortgage rates were starting to climb even before the Bank of Canada raised its benchmark interest rate in early March. The five-year fixed mortgage rate, one of the most popular types of loans in the country, is now above 3%, according to mortgage brokers. That’s more than in 2019, when the five-year fixed rate was just below 3%.

Laura Martin, chief operating officer of mortgage brokerage firm Matrix Mortgage Global, expects mortgage rates to continue to rise as the central bank announced plans to hike rates to tackle soaring mortgage rates. inflation. “Typical pre-pandemic rates were between 4% and 5% and are expected to increase,” she said.

In the Vancouver area, price growth has also slowed. The house price index hit a record high of $1,360,500. This is an increase of 3.6% from February to March. But the previous month, the index rose almost 5%. Home resales increased in line with new listings, although they were lower than last March.

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