The cost of buying a home in Canada has gone up slightly according to the most recent data from Statistics Canada.
The recently released New Housing Price index shows that on average, prices increased 0.1% month-over-month in May, the first increase since August 2022. It further showed that prices were up in six of the 27 census metropolitan areas (CMAs) surveyed in May 2023, down in eight and unchanged in the remaining 13 CMAs.
The report considers the prices of newly built homes throughout Canada and despite the recent increases in many CMAS, prices were down 0.6% compared to May 2022.
Pricing changes in May
Overall, 19 CMAs recorded a year-over-year decrease in new home prices, up from the 14 recorded a month earlier.
Among the CMAs that were surveyed, Victoria recorded the largest year-over-year decline in new home prices in May, down by 2.7%.
St. Catharines–Niagara and Edmonton also reported decreases of 2.4% and 2.3% respectively.
The largest year-over-year increases in May 2023 were reported in Québec at 4.1, as well as Charlottetown and St. John’s both at 1.1%
The largest month-over-month decreases were in Greater Sudbury, down 1.2% and Sherbrooke, Quebec, down 0.7%. The report said home builders’ credit weak local market conditions as the reason for the decline.
Prairie provinces most affordable for homebuyers
Point2homes released a report on June 19 that found affordable housing, especially for those who are renters or first-time homebuyers, is most likely to be available in Regina, Calgary, Edmonton, Saskatoon, and Winnipeg, all cities in Canada’s three prairie provinces: Alberta, Saskatchewan, and Manitoba.
The Statistics Canada New Housing Index also shows that year-over-year, the prairie region, saw a price decrease of 0.8%.
These reports are consistent with a recent study by the Canadian Home and Mortgage Corporation (CMHC) that found housing more affordable in the prairie provinces. The CMHC report says this is because of a much smaller decline in the number of privately owned homes under construction in 2023 than has been seen in other regions.
The CHMC report says the national outlook shows that housing supply will not be able to meet demand soon. While the cost of owning a home has decreased over the past year, home ownership will be less affordable because of higher mortgage rates and still-elevated price levels.
Bank of Canada raises interest rates on mortgages
High interest rates are contributing factor to the prohibitive cost of housing in many Canadian cities. The Bank of Canada (BoC) recently raised interest rates for the second time in 2023 to a high of 4.75%. Interest rates have not been this high since 2021.
The BoC says it has had to raise interest rates to slow spending, which is creating high inflation on the cost of many goods and services, making life in Canada less affordable.
The higher rate directly affects anyone who needs a loan from a financial institution, such as a mortgage. By making it more difficult for Canadians and newcomers to afford larger purchases, such as homes and cars they should, theoretically, be slowing their spending to save more money.
However, the BoC reports that Canada’s economy is continuing to grow due to continued high spending and raising the interest rate was necessary.
Statistics Canada says higher interest rates are impacting activity in the housing market. According to the CMHC, there has been a 64.1% year-over-year increase in unabsorbed inventory (houses built but not sold) between May 2022 and May 2023.
Source: cicnews.com
