According to a recent report provided by Statistics Canada, there has been an increase in house prices in Canada.
The recently published New Housing Price index represents that, on average, the increase in house prices in Canada is 0.1% month-over-month in May, the first increase since August 2022. In addition, the report also demonstrated that prices were up in 6 of the 27 CMAs, i.e., Census Metropolitan Areas.
Moreover, the report considers the prices/ rates of heavily built homes throughout the country & despite the recent increase in CMAs, prices were down by 0.6% this year as compared to May 2022.
Pricing Changes In May
Generally, over 19 CMAs recorded a year-over-year decrease in new house prices, up from 14 in the past month.
Among the CMAs surveyed, Victoria registered/ documented the largest year-over-year drop (2.7%) in new house prices in the month of May.
In addition, St. Catharines-Niagara & Edmonton also reported decreases of 2.3% & 2.4%.
Further, the most significant year-over-year increase in house prices in Canada was in May 2023. Herein, the house prices were increased by 4.1% in Quebec along with 1.1% each in Charlottetown & St. John’s.
Another significant month-over-month decrease was in Greater Sudbury (1.2%), along with Quebec & Sherbrooke (0.7%). The report asserted that the home builder’s credit weak local market conditions/ situations were the primary reason for the decline.
Prairie Provinces: Most Affordable For Homebuyers
Point2Homes provided a report on June 19 that found affordable housing, especially for individuals who are renters & first-time homebuyers. In addition, these are most likely to be available in Calgary, Edmonton, Regina, Saskatoon, & Winnipeg.
Moreover, the New Housing Index by Statistics Canada reveals that the prairie provinces saw a price drop of 0.8% year-over-year.
These reports are consistent with the recent study by CMHC, i.e., Canadian Home & Mortgage Corporation. Well, CMHC found out that housing was more affordable in the prairie provinces as compared to other places in Canada.
Furthermore, the report asserted that this is because of a minor decline in the number of privately owned homes under construction in 2023 than other regions. The report also stated that the national outlook demonstrates that the housing supply won’t be able to meet the demand anytime soon.
While the cost of owning a home has decreased over the last year, home ownership will be less affordable due to higher mortgage rates & still-elevated levels of price.
BoC Raises Interest Rates On Mortgages
High-interest rates contribute to the prohibitive housing cost in Canadian provinces. The BoC, i.e. Bank of Canada, recently increased interest rates for the second time in 2023, i.e., a high of 4.75%. Well, interest rates haven’t been this high since 2021.
The BoC asserts that it had to increase the interest rates to slow spending, thus creating high inflation on the cost of products & services, thus making life in Canada easier & affordable.
The higher rate directly impacts people who need a loan from a financial/ monetary institution, like a mortgage. By making it more challenging for Canadians as well as immigrants/ newcomers to afford larger purchases, like homes, cars, etc., they must, theoretically, be slowing their spending to save more money.
However, the Bank of Canada reports that the economy of the nation will keep on growing because of the consistently high spending & rising interest rates.
Finally, Statistics Canada asserts that higher interest rates affect housing market activities. According to the CMHC, there has been a year-over-year increase of 64.1% in unabsorbed inventory/ stock from May 2022 to May 2023.