Rising interest rates and the cost of living cooled Ottawa's real estate market in July, with home sales falling 35 per cent from the same time last year.

The Ottawa Real Estate Board says 1,110 residential properties were sold in Ottawa last month, compared with 1,718 homes in July 2021.

"We are witnessing a profound slowdown in Ottawa’s resale market," OREB President Penny Torontow said.

"July’s numbers reveal that Buyers are indeed putting on the brakes more heavily than what is typically expected during the mid-summer sales dip. Aggressive interest rate increases are surely impacting the decision to buy at the moment as well as other factors that I mentioned last month."

The 35 per cent drop in home sales in Ottawa in July follows a 29 per cent decrease in June, when 1,508 properties were sold in Ottawa compared to 2,122 in June 2021.

The Bank of Canada increased its key interest rate one percentage point in mid-July, the largest hike in 24 years.

The average sale price of a residential-class property was $716,354 in July, up five per cent from a year ago. The average sale price for a condominium-class property in July was $425,694, an increase of one per cent from 2021.

Torontow says the single-digit increases align with a "traditional stable year-over-year price growth" in Ottawa.

"It is important to point out that average prices tally the entire spectrum of home sales across the city and region. If you look from neighbourhood to neighbourhood, there are so many differing characteristics and attributes, price increases will certainly fluctuate depending on where you live," Torontow said.

"If you are selling your home, now is the time to be patient as days on market return to more normal timeframes. There are still many Buyers out there, but with more choice, they have less pressure and may take their time."

With year-to-date average sale prices at $805,238 for residential and $461,557 for condominiums, the values represent an 11 per cent and 9 percent increase over 2021, respectively, according to the Ottawa Real Estate Board.

Torontow says while home sales were down in July, there was a "silver lining."

"With more properties continually being added to inventory, we are on the cusp of returning to a balanced market, and that is good news," Torontow said.

"July saw 2,338 new listings added to the housing stock, which is on par with the 5-yr average and 5% lower than last year at this time. Our inventory for residential-class properties is currently around 2.9 months and 2.5 months for condominiums. A market is considered balanced with at least four months of supply, so we are well on our way to that paradigm."

The Toronto Real Estate Board reported a 47 per cent drop in home sales in July compared to July 2021.