Prices of Detached and Semi-Detached Homes Hit Hardest by Rising Interest Rates: Report

A for sale is sign is displayed in front of a house in the Riverdale area of Toronto on Sept. 29, 2021. The Canadian Press/Evan Buhler

Prices of detached and semi-detached homes took the hardest hit in the Greater Toronto Area (GTA) last month as sales across all home types continue to be impacted by increased borrowing costs due to higher interest rates, a new report says.

Released by the Toronto Regional Real Estate Board (TRREB) on Dec. 5, the report said that the average price of detached and semi-detached homes in the GTA in November fell 11.3 percent (to $1.4 million) and 13.9 percent (to $1.04 million), respectively, when compared to the same period last year.

According to the TRREB, the average selling price for all home types combined was down by 7.2 percent year-over-year to $1.08 million. “Annual price declines continued to be greater for more expensive market segments, including detached and semi-detached houses,” the report said.

Condo apartments fared better with their average price dipping only 0.9 percent year-over-year (to $708,636), while townhouses dropped 6.4 percent in the same period to $900,314.

Home sales of all types slumped 49 percent from 8,979 units to 4,544 units over a span of one year since November 2021, the TRREB said. New listings, at 8,880, were also down 11.6 percent from last year, and at “a very low level historically.”

‘Short-Term Shock’

On Oct. 26, the Bank of Canada raised the interest rate by 50 basis points to 3.75 percent. The hike marks the sixth consecutive time the central bank has increased its overnight rate target this year. The central bank plans to announce another rate decision on Dec. 7.

Kevin Crigger, president of TRREB, says although the increased borrowing costs impacted home sales, it represents a “short-term shock to the housing market.”

“Over the medium-to-long-term, the demand for ownership housing will pick up strongly. This is because a huge share of record immigration will be pointed at the GTA and the Greater Golden Horseshoe (GGH) in the coming years, and all of these people will require a place to live, with the majority looking to buy,” said Crigger in a statement.

“The long-term problem for policymakers will not be inflation and borrowing costs, but rather ensuring we have enough housing to accommodate population growth.”

Jason Mercer, chief market analyst at TREBB, says the decline in Toronto home prices is slowing down.

“Selling prices declined from the early year peak as market conditions became more balanced and homebuyers have sought to mitigate the impact of higher borrowing costs,” he said in a statement.

“With that being said, the marked downward price trend experienced in the spring has come to an end. Selling prices have flatlined along side average monthly mortgage payments since the summer.”