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June GTA home sales fall on rate hike worries

June 2023 TRREB recap

The Toronto-area housing market slowed slightly in June as buyers became wary of rising borrowing costs, following the Bank of Canada’s latest rate hike.

According to the Toronto Regional Real Estate Board (TRREB), both the average price and sales activity dipped from May levels, though remain up on a year-over-year basis. A total of 7,481 homes traded hands, an increase of 16.5% from last June, though down -16.9% from the 9,012 that sold the previous month.

Read: Bank of Canada hikes target rate to 4.75% in June announcement

The average GTA home price slipped slightly lower on a monthly basis, down about $13,981 per transaction (-1.16%) at $1,182,120. However that's still up 3.2% annually, reflecting longer-term recovery from last year’s rate-hike-induced slump. The MLS HLP benchmark – which indicates the price of the typical home sold – slowed by 1.9% year over year, its lowest annual rate of decline so far in 2023.

In addition to higher mortgage rates dissuading some would-be buyers, TRREB also points to a prolonged lack of supply as the other main factor impacting demand – there’s just not much to choose from as sellers remain hesitant to list their homes. A total of 15,865 new listings came to market, down -3% from last year. Active listings sit at 14,107, down -12.3%.

“The demand for ownership housing is stronger than last year, despite higher borrowing costs. With this said, home sales were hampered last month by uncertainty surrounding the Bank of Canada’s outlook on inflation and interest rates," said TRREB President Paul Baron. 

Borrowing costs rose once again this month, as the Bank of Canada delivered a 0.25% increase in its June 7th announcement. As a result, the benchmark Overnight Lending Rate has risen to 5.74%, Canada’s Prime rate increased to 6.95%, and the best five-year variable mortgage rate offered by lenders now sits at 5.8%.

“Furthermore, a persistent lack of inventory likely sidelined some willing buyers because they couldn't find a home meeting their needs,” he added. “Simply put, you can't buy what is not available.”

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Tight supply continues to put the squeeze on those trying to break into the market, fuelling the kind of sellers’-market conditions that lead to multiple offer situations and bidding wars. As well, a steady flow of newcomers to the city is also propping up demand, says TRREB’s Chief Market Analyst Jason Mercer, who adds that the central bank’s next move will set the stage for market activity in the coming months.

“A resilient economy, tight labour market and record population growth kept home sales well above last year’s lows,” he says. “Looking forward, the Bank of Canada’s interest rate decision this month and its guidance on inflation and borrowing costs for the remainder of 2023 will help us understand how much sales and price will recover beyond current levels.”

Read: Inflation slows to 3.4% in May, stoking rate-hold hopes

Prices are rising the most for single-family homes

June 2023 price and sales data by home type from the Toronto Regional Real Estate Board.

Source: Toronto Regional Real Estate Board

Demand continues to be strongest across the GTA for single-family homes, with detached and semi-detached houses leading the way in terms of price growth. The average detached home now fetches $1,530,997 (5.2%), with semis selling for $1,214,872 (8%). Sales were up 13.3% and 7.4% across both home types, respectively.

Condos saw the largest increase in buyer demand, however, with sales surging 27.2% year over year, reflecting appetite for options priced under the $1-million mark; the average unit price was $739,395 in June, down -1.1%. GTA townhouse prices rose 5% to an average of $978,842, with sales rising 13.1%.

Price growth is strongest in the 905-area markets

Home sales are indeed booming within City of Toronto limits; a total of 2,833 homes traded hands in June, marking a 17,7% uptick from last year. The average home price in Toronto, however, stayed relatively unchanged year over year, at $1,152,424 (-0.05%). Meanwhile a total of 5,789 homes were newly listed, down -3.35% year over year.

Price growth was most apparent in markets outside of the 416; the average home price rose 5.1% across the 905-area markets to $1,200,219, following a 15.7% increase in sales, with 4,648 transactions. Meanwhile, new listings dipped by -5.2%, with 10,636 brought to market. 

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