New Housing Prices Dipped in November

Construction workers work on a home in Deux-Montagnes, Que., on April 20, 2020. The Canadian Press/Ryan Remiorz

The cost of buying a new home dropped slightly in November, according to Statistics Canada.

The national average of a home in Canada dropped 0.2 percent, with the largest decrease being seen in Sherbrooke, Quebec (1.2 percent), St. John’s, Newfoundland (1 percent), and Hamilton, Ontario (1 percent).

Builders in those areas said there were weak market conditions that caused the price drop, according to StatCan.

“Many builders in the 15 [census metropolitan areas] where new home prices declined in November were offering different types of incentives (for example, design credits, rebates) to encourage sales,” the housing report says.

In total, 25 out of 27 cities surveyed saw prices drop or stay steady, StatCan said.

Two areas that saw the cost of new homes increase the most were Trois-Rivières, Quebec (0.5 percent) and St. Catharines-Niagara, Ontario (0.3 percent).

Construction costs were the reason for the increase in cost according to local builders, the report said.

Year-over-year numbers show housing costs have dropped 0.9 percent since 2022 with the largest decreases seen in Ottawa, Ontario (4.7 percent) and Victoria, B.C. (4.2 percent). The biggest annual increases were in Quebec (3.2 percent) and Calgary, Alberta (2.4 percent).

“New home prices have been declining since April 2023. This is due in part to the rapidly increasing borrowing costs seen in Canada since the spring of 2022,” StatCan said.

Investment Increases for Building Industry

The price drop comes after Statistics Canada noted a growth of investment in the construction industry.

Building construction investment increased 2.7 percent to $19.4 billion in October, StatCan said.

“The residential sector grew 3.9 percent to $13.4 billion, while investment in the non-residential sector was essentially flat, remaining at $6.0 billion,” a Dec. 18 report said.

The numbers show that Manitoba saw the largest increase in investment at 16.2 percent, followed by Saskatchewan at 11.5 percent and Alberta at 9.5 percent. The province that saw the biggest decline in construction investment was Newfoundland and Labrador at 6.1 percent.

Investment in single-family homes saw a 3.1 percent increase to $6.5 billion, which was led by Manitoba at 23.3 percent, the report said.

Multi-unit homes also saw an increase in investment by 4.6 percent to $6.9 billion, StatCan said. Newfoundland and Quebec were the only provinces that saw declines in these types of homes, by 8.8 percent and 1.5 percent respectively.

Non-Residental Construction Investment Stays Flat

While the residential construction industry saw increases, non-residential investments remained flat, according to StatCan.

“Gains in industrial (+1.0 percent to $1.2 billion) and institutional (+0.7 percent to $1.6 billion) investments were offset by declines in commercial investment (-0.7 percent to $3.2 billion),” the report said.

Investment in hospital facilities led the institutional sector gains, while the construction of an active cathode materials plant for the electric vehicle supply chain built in Bécancour, Quebec, is credited for the boost in investment for industrial construction.

Housing Prices to Drop in 2024

Housing prices have been forecasted to drop up to 10 percent over the next several months, according to a TD Bank report.

However, the report notes that even a 10 percent drop in housing prices would still mean they are 15 percent higher than pre-pandemic levels.

Supply has been one of the biggest issues driving housing prices across the country, and a recent poll found that three-quarters of Canadians feel immigration is making the housing situation worse.

In 2022, Canada’s population grew by more than a million people, including 607,782 non-permanent residents and 437,180 immigrants, according to The Canadian Press.

Canada is set to welcome 485,000 more permanent residents in 2024 and 500,000 in 2025.

Yet, Canada’s housing agency is still trying to figure out how to build the number of homes that the country currently needs to meet demand. A report released by the Canada Mortgage and Housing Corporation (CMHC) in June 2022 estimated that 3.5 million new homes would need to be built by 2030 to restore affordability.

The CEO of CMHC told the Senate finance committee on Dec. 5 that there was no plan in place to build that number of homes.

“There are many factors that contribute to housing production including things like interest rate trajectories, the availability of skilled labour, local conditions that really impact housing delivery,” Romy Bowers said.

The CMHC report said there needed to be a change in the housing market to ensure enough supply was available.

“There must be a drastic transformation of the housing sector, including government policies and processes, and an ‘all-hands-on-deck’ approach to increasing the supply of housing to meet demand,” said the report.

Noé Chartier contributed to this report.