TORONTO – After months of Statistics Canada posting declining prices for new homes, there are signs that that steady price drop is starting to slow. In some provinces, what builders are charging for new homes is actually starting to increase. The latest New Housing Price Index released Friday showed a 0.1 per cent drop month-over-month in June – but it’s not as significant of a decline compared to previous months. May saw a 0.3 per cent decline, while April saw a 0.5 per cent drop. June also saw a year-over-year decline of 2.8 per cent in what developers are asking consumers to pay for new homes across Canada. Although provinces like B.C. (-0.4 per cent) and Quebec (-0.1 per cent) continued to see a downward trend in new housing prices, multiple provinces like Alberta, Manitoba and Ontario saw builders increase their prices for new developments. Economists say major cities like Vancouver and Toronto continue to weigh on the national market, even as other provinces begin to recover, helping slow the pace of national price declines. “You have these two forces that are pulling against each other,” said Marc Lee, a senior economist with the Canadian Centre for Policy Alternatives, in a Zoom interview with CTV News. “One is the big city momentum of Vancouver and Toronto, where there was a lot of overbuild, a lot of dynamism, a lot of big price increases over the past couple of decades,” added Lee. “And then the rest of the country, where we’re starting to see more of a recovery after a flat period.” Rising mortgage rates and slower population growth in the last few years have resulted in a sluggish demand for buying new homes, which has led to some builders offering discounts and other incentives. “There’s a number of headwinds the housing market is facing, uncertainty being the biggest one, not only for businesses, but consumers as well,” Kevin Hughes, deputy chief economist at the Canada Mortgage and Housing Corporation, said in an interview with CTV News Channel Friday. Economists like Lee say borrowing costs being lower than a year ago may be helping improve demand in some provinces, although it’s too early to know whether that trend will last. But their best guess is that the affordability crisis will continue to result in many Canadians choosing to hold off buying homes – while waiting for mortgage rates to drop – and leaving builders with more housing inventory. “We fear and we suspect, and we’re even measuring, that there is quite a substantial number of young Canadians who would normally be forming households,” Hughes said. “But they are not, so that’s reducing demand, as well.” “Construction costs are still elevated, so it’s a market that is kind of stagnating at the moment,” Hughes added. “The resale market should pick up next year. Construction, however, should continue to decline slightly, so that is not expected to move in any way, shape or form in the near future.” The federal and B.C. governments made a joint announcement in late June, where they proposed purchasing more than 2,000 unsold condos for affordable housing, primarily in B.C., if they were purchased at a discount. “In the absence of governments stepping in and buying up some of these unused condos, those prices will continue to fall,” said Lee. “We are starting to see, particularly in Ontario, evidence of some corporate entities – like real estate investment trusts – buying some of these units up in bulk," added Lee. “So, we’re likely to see more of that, some of which may enter the rental market – some of which may be just held longer term, and then sold a couple of years down the road when, and if, prices recover.”
