Home prices slide most since at least 2005 on rate shock

Canadian home prices saw their biggest monthly decline in at least 17 years as the impact of higher interest rates began to spread across the country.

The benchmark price of a home fell 1.9 per cent in June versus the previous month, according to data released Friday by the Canadian Real Estate Association. That’s the third straight month of falling prices, and the biggest one-time drop in data going back to 2005.

With inflation running at the highest level since the early 1980s, the Bank of Canada has rapidly increased the cost of borrowing, boosting its policy rate to 2.5 per cent from 0.25 per cent since the beginning of March. That has caused an abrupt turn in the market as more buyers find themselves unable to secure financing. Sales fell 5.6 per cent on a monthly basis in June. 

Greater Toronto, the country’s largest city and the center of its financial industry, has seen benchmark prices fall 4.5 per cent in three months to $1.21 million (about US$928,000). But the declines are steepest in the cities and towns around Toronto that gained the most during the COVID-19 pandemic as people used the freedom of remote work to move further away.