Prices continued to edge upwards in the Canadian resale market last month — seeing a near-record rise, no less — but the same can’t be said for the new home segment, underlining the considerable headwinds facings homebuilders across the country.
Statistics Canada’s (StatCan) new housing price index fell by 0.1% between June and July, not only erasing the 0.1% increase observed the month prior, but marking the first dip since May. Prior to May, national new home prices had been trending downwards since August 2022.
New home prices slipped the most month over month in Victoria (-0.8%), followed by Greater Sudbury (-0.7%), Regina (-0.5%), and Ottawa (-0.5%), “with builders in many CMAs noting weakened market conditions as the reason for the reported monthly declines,” said StatCan on Monday.
Conversely, prices edged up month over month in Sherbrooke (+1.2%) and St. John's (+1.0%).
Year over year, new home prices slid 0.9% nationally. StatCan attributes this to borrowing costs, which have risen steadily since July 2022 and have served to hamper the new housing market. The government agency also points to the fact that there was 54.2% more unabsorbed inventory (single-family homes completed but not sold) in July 2023 over July 2022, according to the Canada Mortgage and Housing Corporation.
Locally, Victoria also led the year-over-year decline in July, with new home prices falling 3.7%. Prices also slipped in Edmonton by 2.9%. Meanwhile, the greatest year-over-year increases were observed in Québec (+3.5%), Calgary (+1.6%), and St. John's (+1.6%).
Industry “Downbeat,” Says Home Builders’ Associations
July’s overall price slide is another burden to bear for Canadian homebuilders, 67% of which are already scaling back their building endeavours given the pressures of the times according to a recent report for Q2-2023 from the Canadian Home Builders’ Association (CHBA).
What’s more, out of fear that they won’t secure the buyers necessary to render their projects worthwhile, 22% told CHBA they are axing projects completely.
“While the spring busy season helped prospective new home sales traffic somewhat, affordability challenges related to interest rates and construction costs remain very much a concern, and have been compounded by the July rate hike by the Bank of Canada shortly after Q2 survey data was collected,” said the organization earlier this month.
“Converting prospective buyers into sales remains a challenge, as do closings from previous sales. Due to the high interest rate environment, nearly half of CHBA’s panelists reported that buyers are requiring alternative lending solutions and one-third said they are needing to make accommodations for some buyers so they can close.”
All in all, said CHBA, the Canadian homebuilding industry “remains downbeat,” which spells dismal things for not only homebuilders, but the housing market at large.