In May, for the fourth month in a row, new home prices decreased in Regina (-4.0 per cent) and Calgary (-1.5 per cent) year over year, according to Statistics Canada.
In a report released Thursday, the federal agency said the New Housing Price Index rose by 0.1 per cent at the national level in May and was up 1.1 per cent year-over-year.
“As builders entered the second full month of modified operations since the outbreak, they continued to adapt to new challenges that come with operating virtually. For some builders, these adaptations may be offered permanently, as part of their regular services moving forward,” said StatsCan.
“Although some COVID-19 restrictions eased for the construction industry, the strict safety protocols put in place continued to slow the pace of new home building, resulting in project delays and indefinite closing dates for buyers. At the same time, home buyers faced with employment uncertainty and the challenges of stay-at-home-routines had to reassess their purchasing decisions.
“The continuing challenges from both the builder and buyer still adjusting to this new reality coincided with new home prices showing little or no change in 21 out of the 27 census metropolitan areas (CMAs) surveyed in May.”
Ottawa (+1.0 per cent) reported the largest increase in new home prices in May, continuing the upward trend that began in October 2017. Despite COVID-19, builders continued to report strong demand for new homes in the region. With population figures up 2.3 per cent from last year, this population growth continued to provide support to a housing market where the inventory of available homes has been low, said Statistics Canada.
New house prices in Canada’s historically expensive housing markets, Vancouver and Toronto, were unchanged for the second consecutive month in May following price gains in February and March, it said, adding that for the 11th month in a row, the largest year-over-year price increases occurred in Ottawa (+10.9 per cent) and Montréal (+8.1 per cent).
“As some parts of the economy slowly start to open with strict physical distancing rules in place, builders are catching up on completing homes under construction. Delays in housing construction and new phases of development, as well as lower new home sales are forecast to continue in the short term. We expect both buyers and builders to remain cautious when it comes to the buying and building of homes,” said the federal agency.
“We also expect some overall dampening in the demand for new homes, as the Canada Mortgage and Housing Corporation’s stricter policies take effect on July 1. The new policy, requiring higher minimum credit scores and lower debt servicing ratio among others, will be applied to all new applications for mortgage insurances with less than a 20 per cent down payment. This new policy will primarily impact first-time home buyers.”
