New home prices have dropped again, declining 0.2 percent month over month in January in 25 of 27 cities, according to a new report by Statistics Canada.
The Bank of Canada raised borrowing costs in January, increasing the policy interest rate by 25 basis points, bringing it to 4.5 percent.
The report notes the price of softwood lumber dropped in January, a total of 61.2 percent since its peak in March 2022, reducing construction costs for new home builds.
Ten census metropolitan areas (CMAs) reported the highest decrease in new home prices in January since September 2018. Winnipeg, Victoria, and Kitchener-Cambridge-Waterloo recorded the largest decrease.
“Builders reported deteriorating market condition and decreased construction costs as the reasons for the declines,” said the report.
Meanwhile in Winnipeg, the Canada Mortgage and Housing Corporation indicated that the number of single-family homes (defined as single detached, semi-detached, and row) completed but not yet sold was 40 percent higher year over year in December 2022.
This might be good news for new homebuyers who will have more price negotiating power, notes the report.
Prices in St. John’s and Calgary increased in January 2023.
“Nationally, new home prices increased 2.7% on a year-over-year basis in January 2023, significantly lower than the 11.8% year-over-year increase reported in January 2022, when the market was still hot,” Statistics Canada said.
In terms of resale, according to the Canadian Real Estate Association, the ratio for national sales to new listings was 57.8 in January 2023, compared with 77.9 in January 2022, indicating a balanced market.
Numbers higher than 60 points mean a seller’s market, while less than 40 points indicate a buyer’s market, according to the report.
“Calgary (+10.9%) recorded the largest year-over-year gain in new home prices in January 2023, followed by Windsor (+5.9%) and Québec (+5.3%). These increases have moderated compared with January 2022, when annual growth stood at 15.3% in Calgary, 21.0% in Windsor and 10.2% in Québec,” said the report.
The New Housing Price Index measures changes over time in the selling prices of newly constructed residential houses. The prices are considered at market selling and do not include goods and services or provincial taxes.
