Canadian immigration policy changes may mean a drastic shift for new home prices in the coming month. Statistics Canada’s October New Housing Price Index (NHPI) shows the sharpest monthly drop since 2009. The drop comes after the index returned to positive growth, potentially warning that last month’s immigration announcement has shifted buyer outlook.
Canadian New Home Prices Have Been Moving Sideways But Just Saw The Biggest Monthly Drop Since 2009
The Canadian New Housing Price Index (NHPI). An indexed value of new home prices in 27 Census Metropolitan Areas (CMA) across Canada.
Source: Stat Can; Better Dwelling.
Canadian new home prices just saw the largest monthly drop in over a decade. The NHPI fell 0.4% in October, the sharpest monthly decline since April 2009. Just a single month was able to send the index 7 months back, all the way to March.
There’s a catch here—almost all of the weakness is concentrated in a handful of large markets. The drop was driven by just 9 of the 27 census metropolitan areas (CMAs) in the index. Those cities include Toronto (-1.2%) and Vancouver (-0.6%), with the former having seen new home prices fall a whopping 30% since peak.
Since those markets represent a huge share of total transactions, they tend to skew the index. However, 11 CMAs saw prices unchanged in October, and 7 showed prices that climbed. Not the picture we assume if we don’t dive into the makeup.
Canadian New Home Prices Were Moving Towards Stabilizing Before Immigration Announcement
Annual growth rate for the Canadian New Housing Price Index (NHPI), an indexed value of new home prices in 27 Census Metropolitan Areas (CMA) across Canada. Shown in percentage points.
Source: Stat Can; Better Dwelling.
The 12-month trend shows more favorable data. Annual growth was down 0.2% in October, with most (16 in 27) CMAs down on an annual basis. However, the longer-term trend shows things are improving from this perspective.
Generally speaking, new home prices are moving towards stabilizing—at the very least. Not in major cities like Toronto and Vancouver, but at the national level the index is moving back towards growth. However, the monthly volatility in both directions is creating enough noise that it’s worth monitoring where things are heading.
Monthly growth showed a mixed sign. At the national level, the downtick was the largest since the Great Recession. Annual growth is on the rise, such a sharp monthly drop is often a sign that sentiment abruptly changed—likely driven by the shift in immigration policy last month.
It’s worth considering the monthly movement was largely concentrated in a handful of markets. Most cities saw prices stall last month, or even rise. That said, those cities tend to lead the market as the largest, investor-driven hubs. Most cities are also seeing negative annual growth. In other words, the massive monthly downtick at the national level is just as likely to be noise as the lack of monthly movement from the majority of cities.
I heard the bull case—the gov is giving 30 year loans to investors to help them close at a lower price.
With such rabble rousing south of the border though, I’d rather spend a little more and wait out the potential downside—and believe me, there’s more downside than upside when less than 10% of your population can afford a home & so the gov tries to and get investors to buy them all—foreign landlords now exempt from some non-resident taxes.
Trudeau needs to get involved to support prices. People depend on the value of their homes for retirement. Canada MUST drop rates to zero to protect house prices. For the sake of the economy.
For the sake of the economy prices need to come down to normal and interest rates should go back up to normal. You’re thinking short term, for the long term good of the country houses need to be affordable for regular people, not just the top 20%. Young people have little hope of owning a home anytime soon the way things are.
Most taxes are taken from new entrants into the housing market, so this is a problem.
Its like 1/3 the cost of the home for developer taxes. 5% GST. Then each piece of wood and ventilation is also taxed, then laborers pay tax, and then there is still an annual property tax, which seniors don’t generally have to pay.
Most peoples survive because they already owned their home, made when we had less tax.