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A For Sale sign sits on the front of a house in Oakville, Ontario on Aug. 15. Rising interest rates have made it difficult for borrowers to qualify for a large enough mortgage to purchase a property in the Toronto region.Cole Burston/The Globe and Mail

Toronto home prices dropped again in October, contributing to an 18-per cent decline in real estate values since the Bank of Canada started raising interest rates earlier this year.

The home price index reached $1,098,200 last month, a 1-per-cent fall from September, according to the Toronto Regional Real Estate Board or TRREB. The index is the industry’s preferred measure of home prices because it adjusts for volatility and excludes the high end of the market.

The decline began in the March-April period, after the central bank embarked on its plan to arrest runaway inflation through higher lending rates.

Areas that experienced some of the sharpest price increases during the pandemic’s real estate boom are now losing value the fastest. That includes the Halton region, a wealthy area to the west of the city of Toronto, and Durham, which lies east of the city. Halton is down 23 per cent and Durham is off by 22 per cent.

The recent deterioration in home prices in the Toronto region has wiped out gains made over the past year. The home price index for the region is down 1.34 per cent in the 12 months to October.

The number of home resales last month was similar to that of September after adjusting for seasonal influences, according to TRREB. But compared with October of last year, the volume was down 49 per cent.

The jump in borrowing costs has made it difficult for borrowers to qualify for a large enough mortgage to purchase a property in the Toronto region. That has reduced the number of would-be buyers and slashed competition – and therefore prices – for homes.

At the same time, homeowners have postponed planned home sales or have made the decision not to sell in the current environment, realtors have said. The number of new listings continues to dwindle into the fall.

TRREB said the “persistent lack of inventory” helped explain why home prices are not declining as quickly as during the spring and summer. “New listings coming on to the market are very low from a historic perspective,” said Jason Mercer, the board’s chief market analyst.

Last month’s slowdown does not reflect the Bank of Canada’s interest-rate announcement last week that pushed the benchmark interest rate up another half a percentage point to 3.75 per cent. The central bank said it would continue on the same path of rate hikes to get inflation under control, although it indicated it was getting closer to the end. Mortgage rates have more than doubled from levels when a borrower could pay less than 2-per-cent interest on a home loan.

The rise in borrowing costs has cooled real estate activity across the country. In Vancouver, the country’s priciest property market, sales have slowed and home values have also been steadily declining. Across all property types, the home price index was down 0.6 per cent in October over September, and down 9.2 per cent over the past six months, according to the local board. However, compared with October of last year, the index was up 2.1 per cent.

Detached homes in the Vancouver area have lost the most value, with the index declining 0.7 per cent over the past month. Meanwhile, condo prices fell 0.2 per cent and attached homes dropped 0.5 per cent. Year over year, detached houses are up 1.6 per cent while the others are up 5 per cent and 7 per cent respectively.

The number of resales in the region was down 45.5 per cent year over year, but was up 13 per cent in October compared with September.

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