Rising interest rates, elevated borrowing costs, and waning demand weighed on homebuilding across Canada in 2023, leading to an annual decline in new home prices come year end.

According to Statistics Canada, the national New Housing Price Index declined 0.9% year over year in December. Locally, prices fell or were unchanged in 21 of the 27 Census Metropolitan Area (CMAs) included on the index.

The most significant annual decline was reported in Ottawa, with prices falling 4.8%, followed by Victoria, with a 4.2% drop. In comparison, new home prices in those cities experienced annual increases of 6.6% and 3.7%, respectively, in December 2022.

The resale markets in the aforementioned municipalities didn’t fare much better in 2023; sales in Ottawa slipped 11.0% annually, while Victoria reported a 8.7% drop in activity.

StatCan reported that with demand weakening, new home builders in most major markets increasingly offered incentives, such as cash rebates, to incite sales. However, the national supply of unabsorbed single-family homes — including single detached, semi-detached, and row houses — was up 37.6% in December compared to a year prior.

While many municipalities struggled, those that already bore more affordable conditions saw new home prices inch up year over year in December.

The greatest annual gains were seen in Québec, at 3.3%, and Calgary, at 2.7%. As of December, the benchmark price of a single-family home in Canada was $779,100 — in Québec it was $392,500, and in Calgary it was $635,600.

Further cementing its stance as Canada’s hottest real estate market, Calgary also experienced the largest monthly increase in new home prices in December. Local builders attributed the 0.4% bump from November to December to rising construction costs. New home prices in Saskatoon and Sherbrooke edged up 0.2% for the same reason.

Meanwhile, weaker demand was to blame for the 1.2% monthly decline in Halifax, and the 0.9% drop in Regina. Overall, prices fell or were unchanged in 21 of 27 CMAs, resulting in no movement to the national index on a monthly basis in December.

New Home Prices See Annual Drop After Year of Rising Rates, Declining Demand by Zoe Demarco | Storeys