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New-Home Prices Dip in Canada, Signaling Market Stabilization

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In the month of July, new-home buyers in Canada experienced a slight decrease in house prices, suggesting a steady market following this year’s rebound. According to Statistics Canada, the new-house price index declined by 0.1% compared to the previous month, after two consecutive months of growth.

On a year-on-year basis, prices in July were 0.9% lower, signaling a correction in the market. Sales of existing homes also saw a decline in July, dropping by 0.7% from the previous month. This decrease was largely attributed to a decline in Toronto, according to data released by the Canadian Real Estate Association last week.

Despite the dip in sales, benchmark existing house prices, which are calculated similarly to the S&P CoreLogic Case-Shiller National Home Price Index, rose by 1.1% from June. Currently, they are only 1.8% below levels seen a year ago.

The Bank of Canada recently raised its key policy rate to 5%, reaching a 22-year high. While policymakers have paused for now, they will closely monitor incoming data to determine if further rate hikes are necessary at their next meeting in September.

Statistics Canada conducted a survey in 27 metropolitan areas and found that prices for new homes decreased in eight areas, remained unchanged in 12 areas, and increased in seven areas. The largest price declines were observed in Victoria, followed by the greater Sudbury region in Ontario and the national capital Ottawa. This weakening of the market was attributed to the central bank’s decision to raise rates by a quarter percentage point in July.

It is important to note that the new-house price data from Statistics Canada does not include prices for newly built condominium units.

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