Despite the threat of continued interest rates the red hot housing market hasn’t seen much of a slow down. February home sales in Toronto were down compared to the all-time record in 2021, but represented the second most February sales in history. New listings dropped so competition between buyers, however, remained tight enough to support double-digit price growth year-over-year.
The central bank said Wednesday it was increasing its key rate by a quarter of a percentage point to 0.5 per cent in a bid to help fight inflation which is at its highest level since 1991. This led to Canadian banks to increase their prime lending rates. Canada’s Big Five banks — RBC, TD Bank, BMO, CIBC, and Scotiabank — all said they would increase their prime rates to 2.70 from 2.45%, effective March 3. The rise in rates will increase the cost of loans such as variable-rate mortgages, but won’t directly affect fixed-rate mortgages.
The MLS Home Price Index Composite Benchmark was up by 35.9 per cent year-over-year in February. The average selling price for all home types combined was up by 27.7 per cent to $1,334,544. The pace of price growth varied by home type and region, but there was relative parity between low-rise and condominium apartment growth rates.
“Demand for ownership housing remains strong throughout the GTA, and while we are marginally off the record pace seen last year, any buyer looking in this market is not likely to feel it with competition remaining the norm. Many households sped up their home purchase and entered into a transaction in 2021, which is one reason the number of sales were forecasted to be lower this year and a trending towards higher borrowing cost will have a moderating effect on home sales. Substantial immigration levels and a continued lack of supply, however, will have a countering effect to increasing mortgage costs.”
Kevin Crigger, President, Toronto Regional Real Estate Board
Although The Bank of Canada said it would likely need to raise rates further to reduce inflation, which hit 5.1% in January, the demand for housing in the GTA isn’t seeing a reduction any time soon despite efforts of the Liberal government to cool the hot housing market.
