Toronto real estate market remains more supportive of sellers despite slowdown in June

As Toronto home sales slowed month-on-month in June, one market analyst noted that the current market cooling is out of seasonal patterns, due in part to higher borrowing costs.

Home sales in the Greater Toronto Area rose 3.2% year-over-year to $1,182,120 in June, according to the Toronto Regional Real Estate Council. Despite an average year-on-year price increase, June prices were lower than the May average of $1,195,929.

“It’s important to watch that seasonally adjusted sales are falling. And we knew that sales were on a downward trend,” said John Pasalis, president and broker of Realosophy, in an interview with Bloomberg.

Despite the fact that the dynamics of the real estate market in Toronto is slowing down, he said, he remains a seller’s market.

Pasalis said it could be difficult to discern how much of the market’s pullback is due to seasonality and how much is due to sentiment as “buyers hit pause.” Many potential buyers, who are on the market for about four or five months, usually “stop in July and August,” he said.

However, according to Pasalis, the current market dynamics are out of seasonal trends, and he expects the market to become even “sluggish” in autumn.

“A lot of this has to do with a change in tone on the part of the Bank of Canada. I mean, one quarter-point advance really changed the mood of the market,” he said.

“We left the market when buyers began to experience a “fear of missing out” on a profitable offer. Many buyers are now stopping because they see the market is cooling down.”

In June, the Bank of Canada raised its key rate by 25 basis points to 4.75% after leaving rates unchanged in April and March.

Pasalis said the sharp increase in fixed mortgage rates “has an impact on affordability,” making it harder for buyers to enter the market.

Ahead of the Bank of Canada’s decision next week (July 12), Pasalis said another interest rate hike “will reinforce negative sentiment.” He said the market had largely rebounded earlier in the year on expectations that the central bank had put a hold on rate hikes, and many buyers expected rates to start to come down in the near future.

“Now it looks like there won’t be any cuts any time soon. And the longer rates remain high, the less pressure on the market from buyers will be,” Pasalis said.