Home prices in Canada fell for the seventh month in a row in September, falling nearly 9% since the peak as rising borrowing costs kept purchasers on the sidelines.
According to data issued Friday by the Canadian Real Estate Association, the benchmark price of a property fell 1.4% in September compared to the previous month to C$766,000 ($557,070). This was a lesser dip than the 1.6% drop in August.
The Toronto suburbs and smaller areas in southern Ontario that suffered large price increases during the Covid-19 outbreak are still experiencing a correction. The benchmark price in Mississauga, Ontario, has fallen 13% since February. It's down 18% in Kitchener-Waterloo, approximately an hour's drive from Toronto.
However, prices rose in a handful of places in September, including Calgary, Ottawa, and Oakville, Ontario.
The Bank of Canada is expected to raise interest rates by at least 50 basis points on Oct. 26 in a bid to temper inflation, which is near its highest level since the early 1980s. Variable mortgage rates, which are now above 5% at major commercial banks, reset when the central bank rate changes.
According to CREA data, the benchmark price in Greater Toronto fell 0.6% less than the national average in September, falling 0.6% on a seasonally adjusted basis. This brings the decline in Canada's largest metropolis to just over 9% since February.
Sales are down 32% from the previous September, indicating a slowing of activity.
"The essential thing to remember is that we're still in the midst of quick transition, with buyers and sellers trying to feel each other out while many people have had to rethink their house search plans," CREA Senior Economist Shaun Cathcart said in a statement."Resale markets may remain calm for some time yet, with the flip side being increased pressure on rental markets."
Since March, Governor Tiff Macklem and his aides have raised the benchmark rate by three percentage points to 3.25%. Trading in overnight swaps markets indicates that they will continue to raise rates to as high as 4.25% in the coming year.
This, in turn, may continue to put pressure on the housing market as mortgage rates rise. According to a recent research by Royal Bank of Canada economists, total ownership costs, including mortgage payments, have climbed to around 60% of a typical household's income, which is greater than in the early 1990s.