According to Statistics Canada, new home prices in Canada declined by 0.2 percent month over month in October, following the 0.1 percent decline recorded in the previous month. Prices were up in 5 of the 27 census metropolitan areas (CMAs) surveyed, down in 7 of them, and unchanged in the remaining 15. This was the first consecutive monthly decrease in the index since July 2019.
Since March 2022, the Bank of Canada has increased the policy interest rate six times, bringing it to 3.75 percent in October. These higher interest rates have continued to reduce the number of buyers in the housing market, with some builders citing bad market conditions as the reason for the decline in the prices of new houses.
In October, new home prices decreased the most in Vancouver (-0.8 percent), the first recorded decrease in this CMA since June 2021. According to the Real Estate Board of Greater Vancouver, a near-historic low in the number of resale home sales in Vancouver, combined with increases in the number of active listings, has placed downward pressure on home prices.
Montréal and Québec recorded the largest price increases for new homes (both +0.4 percent) among the 27 CMAs surveyed in October. Builders in Montréal cited an increase in construction costs as the key driver of new home price growth. The cost to construct a single-detached house or townhouse in Montréal has risen 4.9 percent and 4.7 percent, respectively, since the beginning of 2022, largely because of continued labor shortages.
Nationally, new home prices increased by 5.1 percent on a year-over-year basis, decelerating for the seventh consecutive month. This increase is less than half of the year-over-year growth recorded in October 2021.