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Toronto’s real estate activity slowed further in July after the Bank of Canada’s latest interest-rate hike injected uncertainty back into the housing market.

The volume of resales in the Toronto region fell 8.8 per cent from June to July after removing seasonal influences, according to the Toronto Regional Real Estate Board. It was the second straight month of declines and comes after the central bank resumed raising interest rates in June after keeping them steady from February through May.

The Bank of Canada has said it is willing to raise rates above the current 5 per cent if economic indicators aren’t on the right path, which has provided no clarity on the future of borrowing costs.

“Uncertainty surrounding the direction of borrowing costs, jobs and the overall economy has impacted home sales over the last two months,” the real estate board’s chief market analyst Jason Mercer said in a news release.

Latest interest rate hike jolts Toronto real estate market

More homeowners put their properties up for sale, with new listings rising 7.7 per cent from June to July on a seasonally adjusted basis. The volume was about 4 per cent below the 10-year average.

The home price index, which removes the highest priced homes, was $1,170,400 last month. That was a 1.1-per-cent increase over June and the fifth straight month of price gains.

Although mortgage rates are much higher than a year ago, the competition for housing has remained strong. A record number of new permanent residents and newcomers are being admitted to the country as the federal government boosts immigration levels in part to help fill labour vacancies.

The real estate board said Canada’s population growth “will be unsustainable if people can’t find an affordable place to live.” Many economists have said there is a mismatch between housing supply and demand.

One economist suggested Ottawa should lower its immigration targets. “As housing affordability pressures continue to mount across the country, we believe Ottawa should consider revising its immigration targets to allow supply to catch up with demand,” Stéfane Marion, chief economist with National Bank of Canada, said in a report.

In Vancouver, it was a similar situation in terms of activity. Home sales fell 18 per cent from June to July. Compared with the same month last year, the volume of sales was up 29 per cent.

The local real estate board said that was a sign of robust demand. More homeowners put their properties up for sale and new listings grew year over year, but the number of new listings was 5 per cent lower than the 10-year average.

The home price index reached $1,210,700 last month, a 0.6 per cent increase from June. Home prices increased the most for detached houses followed by condos and semi-detached houses.

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