The adjustment of the real estate market in the Greater Toronto Area (GTA) intensified last July, as sales decreased by 47% compared to the same period last year, and by 24% compared to the previous month, June.

A report issued today by the Toronto Real Estate Board (TRREB) indicates that 4,912 homes of various types were sold in July in the Greater Toronto Area, which is slightly more than half of the 9,339 homes sold in July 2021.

This is an indication of a slowdown in the real estate market in Canada's largest cities after the hectic pace observed in the first half of this year and late last year.

The real estate board and realtors attribute a large part of this slowdown to the rise in mortgage costs after the Bank of Canada raised the key interest rate by a full percentage point to 2.5% on July 13.

This was the largest increase in the key interest rate in Canada since August 1998, causing people to reconsider their housing intentions.

Many potential buyers are waiting for further price declines in the fall, while sellers are waiting for the market to swing back in their favor.

Some sellers are even canceling their listings in favor of benefiting from the booming rental market where vacancy rates are declining and prices are rising.

In January, when the real estate market was hot, 380 condominium sale listings were canceled in the Greater Toronto Area. According to the real estate company "Strata," this number rose to 2,822 in June, an increase of 643%.

However, the apparent moderation in sales volume is slowing down the impact on prices.

The average selling price of homes across various categories reached $1,074,754 last July, an increase of 1.23% from $1,061,724 in July 2021, but a decline of 6.22% from $1,145,994 in June 2022, according to the real estate board.

The average selling price of detached houses declined by 3% year-over-year to $1,362,598 last month, with sales of this category of homes declining by 46%.

However, prices of semi-detached houses, townhouses, and condominiums rose between 5% and 7% over the year.

The number of homes newly listed for sale last month reached 12,046, recording a 4% annual decline.

The real estate board sees that the current market requires government intervention, especially to stimulate housing supply and review mortgage policies.

"Policymakers can help alleviate some of this uncertainty," added De Mitcheli, who recommends that the government reconsider the stress test set by the Office of the Superintendent of Financial Institutions.

The mandatory test sets the qualification rate for uninsured mortgages at two percentage points above the interest rate mentioned in the contract, or at 5.25%, choosing the higher of the two.

The real estate board president, Kevin Craig, goes in the same direction, calling for exploring longer amortization periods for mortgages up to 40 years.