The aggregate home price in the Greater Toronto Area decreased by nearly six per cent from the second to third quarter this year and is expected to drop once again in the coming months.

A report released today by Royal LePage showed GTA housing prices up 2.1 per cent year-over-year to $1.09 million in the third quarter of 2022. However, that number is expected to drop to $1.08 million in the final quarter of this year, marking the third consecutive quarter of price declines.

The more pessimistic report comes after the realtor’s July prediction that prices in the GTA would be up approximately three per cent by the fourth quarter of this year. At the time, Royal LePage said that its analysts believed the second quarter “produced most of the price declines we will see this cycle” and that values would more or less hold over the rest of the year.

There has been a cooling trend across the housing market nation-wide over the past few months following aggressive interest rate hikes by the Bank of Canada in an attempt to slow inflation.

Experts say the market is in the midst of an historic correction following skyrocketing home prices at the height of the pandemic, due in part to low interest rates and increased disposable income for many Canadians.

“We entered the fall without the typical bump in fall market value,” Phil Soper, president and CEO of Royal LePage, told CP24 Thursday. “Normally we see the number of sales bump up in September after the summer break and it didn’t happen this year, in fact, sales dipped a little bit month-to-month which is a clear indication that we’re not through this market correction yet.”

The Union Bank of Switzerland released their ‘Global Real Estate Bubble Index 2022’ on Wednesday. The annual report measures which cities have the greatest housing bubble risk.

Toronto was ranked number one in the world, while Vancouver came in at number six.

“In such overheated markets, with already very stretched housing affordability, the recent rate hikes by the Bank of Canada could be the last straw that broke the camel’s back,” the report said. “New buyers and owners during mortgage renegotiations not only need to pay higher interest rates but are also required to provide more income to qualify for a mortgage.”

Royal LePage had initially predicted that the average price of a home in the GTA would top $1.3 million by late 2022, however it has now revised its forecast downward on multiple occasions.

Karen Yolevski, chief operating officer of Royal LePage, said in a press release that sidelined demand as a result of the ongoing housing correction has had a spillover effect and is now further exacerbating the issue of rising rents across Toronto.

Many first-time buyers have put their purchase plans on hold for the time being, which has caused a surge in rental demand and sent rental prices skyrocketing over the last several months,” she said.

The Bank of Canada has increased its key overnight lending rate from 0.25 per cent to 3.25 per cent so far this year and has warned of further hikes in a bid to bring inflation under control.

Soper, however, told CP24 that he still anticipates that prices will level out and start to climb again, likely sometime next year.

“Once we’re through this rising rate environment… we’re going to have to start worrying about home prices rising too rapidly again,” he said. “We really just have to work through this period of unsettled economic times, get inflation under control and the housing market will be back on its feet.”