Bank of Canada's expected rate hike could further cool GTA real estate, experts say

With the latest figures from the Toronto Real Estate Board showing home prices and sales down, would-be sellers and buyers are now wondering how next week's widely expected Bank of Canada rate increase will affect the market.

Next Wednesday, Bank of Canadawill announce its trend-setting interest rate, and the signals from governor Stephen Poloz are strong enough that economists are nearly unanimous in predicting the rate will rise, likely by 0.25 per cent.

• Bank of Canada poised for rate hike on July 12
• Listings way up, sales way down: Toronto's June real estate stats are out

It would mark the first increase in seven years.

Such a move can't help but have some impact on houseprices in the GTA. The question is: how significant will that impact be?

A quarter-point increase is "not huge," but wouldcontribute to the real estate slowdown, said Sherry Cooper, chief economist of Dominion Lending Centres.

"It wasinevitablethat rates were going to rise,"Cooper said Thursday in aninterviewwith CBCToronto."Longer term, the impact will depend on how many more rate hikes and how quickly they happen."

She predicts a further bank of Canada rate hike later this year and perhaps three rate hikes in 2018.

The average price of all homes sold in the Greater Toronto Area in June was$793,915, according to TREB'smonthly statistics released Thursday. That's down 13.8 per cent from its peak in Aprilof $920,791.

It was April when the Wynne government announced a new tax of 15 per cent on foreigners'purchasesof residential real estate in the Greater Golden Horsehoe, an area stretching as far from the GTA as Peterborough, Barrie, Wateloo andNiagara Falls.

Observers also point to a sharp increase in listings and tougher requirements to qualify for mortgages as other factors that have helped coolthe market.

"The benchmark rate going up shouldn't affect the housing market any more severely," Lauren Haw, CEO of Toronto-based online real estate brokerageZoocasa.

Even if the Bank of Canada's move next weekpushes mortgage rates up by as much as half a percentage point, "it's still an incredibly inexpensive lending market," Haw said Thursday in an interview with CBC Toronto.

Mortgage rates in Canada have been at historical lowssince starting to fall after the 2008-2009 recession. Those rates remain "afew more hikes away" from having a substantial impact on home purchasers, said Haw.

Average sale prices in Toronto (June)

• Detached:$1,386,524
• Semi-detached:$987,404
• Condo:$552,679

Average sale prices in 905 (June)

• Detached:$948,099
• Semi-detached:$653,936
• Condo:$436,097