New home prices in Canada declined 0.2% month over month in January. Prices were down or unchanged in 25 of the 27 census metropolitan areas (CMAs) surveyed and up in 2.
Borrowing costs rose again in January, as the Bank of Canada increased the policy interest rate an additional 25 basis points, bringing it to 4.5%. As mortgage rates have increased, housing demand has been impacted, with the Canada Mortgage and Housing Corporation (CMHC) reporting 18.7% more single-family homes (single detached, semi-detached, and row) completed but not sold (unabsorbed inventory) in December 2022 compared with the same month in 2021. In addition, the price of softwood lumber fell again in January, declining a total of 61.2% since the high in March 2022, reducing builders’ construction costs.
These changes were felt by builders, as 10 CMAs saw decreases in new home prices in January, the most since September 2018. Winnipeg (-1.3%) recorded the largest decrease in January 2023, followed by Victoria (-1.1%) and Kitchener-Cambridge-Waterloo (-0.9%). Builders reported deteriorating market condition and decreased construction costs as the reasons for the declines.
In Winnipeg, CMHC reported that the number of new single-family homes completed but not yet sold increased 40% year over year in December 2022. These circumstances may potentially give buyers more options in choosing a new home and more bargaining power in negotiating its price.
Meanwhile, prices for new homes increased in St. John’s (+0.6) and Calgary (+0.1) 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.
In the resale housing market, the Canadian Real Estate Association reported that the national sales to new listings ratio for the resale homes stood at 57.8 in January 2023 compared with 77.9 in January 2022, pointing to a cooling market. A ratio between 40 and 60 points to a balanced market, higher than 60 points to a seller’s market, and less than 40 points to a buyer’s market.
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.
