In Canada, new-house prices saw a slight decrease last month despite some signs of market recovery.
Data Insights
Statistics Canada reported a 0.1% dip in the new-house price index for January compared to December, following no change in the previous month. Nationally, prices were down 0.7% from the previous year, marking a 10th consecutive annual decline – the longest period of weakness since 2009.
Regional Trends
Among the metropolitan areas surveyed, Ottawa experienced the largest declines in January. Prices fell by 0.4% from December and 5.0% annually, with builders offering promotions to stimulate sales. The Canadian capital has witnessed 13 straight months of decreasing new-home sales prices.
Market Overview
Overall, prices either decreased or remained unchanged in 21 out of the 27 surveyed areas, reflecting the softness seen in new-home prices alongside a downturn in existing home sales. Seasonally-adjusted benchmark house prices, similar to the S&P CoreLogic Case-Shiller National Home Price Index, dropped by 1.2% in January compared to the previous month but showed a 0.6% increase year-on-year. Existing-house prices remain about 18% below the peak seen in March 2022.
Sales Activity in the Canadian Housing Market
Despite a recent slowdown due to aggressive interest rate hikes by the Bank of Canada in early 2022, sales activity in Canada’s housing market has begun to show signs of recovery. Data released by the Canadian Real Estate Association revealed a 3.7% month-over-month increase in sales of existing homes in January, following a significant 7.9% surge the previous month.
Economists’ Outlook and Market Predictions
As economists closely monitor the housing market, concerns linger around the ability of the rebound to sustain momentum amidst high interest rates and a broader economic slowdown. Bank of Canada policymakers have expressed caution, noting the potential for a stronger-than-expected recovery in the upcoming spring months which could keep consumer inflation above the target of 2%.
Inflation Trends and Market Drivers
While annual inflation saw a slight cooling to 2.9% in January from 3.4% in the preceding month, shelter costs remain a predominant force driving inflation rates. It is essential to note that the new-house price data from Statistics Canada specifically focuses on single-dwelling, semi-detached, and row houses, excluding newly built condominium units.
