According to Statistics Canada, new home prices in Canada declined 0.2 percent month over month in January. Prices were down or unchanged in 25 of the 27 census metropolitan areas (CMAs) surveyed and up in two.
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 percent. As mortgage rates have increased, housing demand has been impacted, with the Canada Mortgage and Housing Corporation (CMHC) reporting 18.7 percent 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 percent 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 percent) recorded the largest decrease in January 2023, followed by Victoria (-1.1 percent) and Kitchener-Cambridge-Waterloo (-0.9 percent). 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 percent 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.
Nationally, new home prices increased 2.7 percent on a year-over-year basis in January 2023, significantly lower than the 11.8 percent year-over-year increase reported in January 2022, when the market was still hot.