Canadian home sales are sliding lower across the country, and new homes aren’t immune to the dive. The absorption of newly-built and priced homes slipped in April, according to the CMHC. The good news is the most popular purchase price range for new homes is lower than you think it is. The bad news is, the drop in purchasing is especially hard on the luxury segment, which tends to lead the market.
Canadian Newly-Built and Bought Homes Slip 7% Lower
Absorption of newly-built and priced homes fell in April, similar to existing home sales. Across Canada, only 10,278 units were sold in April, down 7.5% from the month before. Compared to last year, this is 10.8% higher, but the base effect is a bit of a skew. April 2020 was the first full lockdown month, which led to a temporary slowdown in new home sales.
The Most Frequently Purchased Price Range For Newly-Built Homes Is $300k to $400k
The most frequently absorbed price range was well under half-a-mil. There were 1,728 newly-built homes sold in the $300k to $400k price range in April. The volume fell 20.3% from a month before, but remains 52.6% higher than last year. Worth mentioning that last April, the most frequently absorbed price was $400k to $500k. More affordable homes are being absorbed. Clearly, these units were not in Ontario.
Canadian Newly-Built Home Sales By Price Range
The number of units absorbed of newly-built homes that have been priced.
Source: CMHC; Better Dwelling.
The Share of Homes Over $1M Is Consistent
The number of absorbed homes that were newly-built, with a price tag over $1 million slipped lower. There were 1,191 homes absorbed with prices above $1 million in April, down 2.4% from the month before. Compared to a year ago, this is an increase of 8.1% from the same month last year. Underrepresented in growth compared to the general market, but not by much.
Homes in this segment were a fairly consistent share of total home sales. It was a tight range for April 2021 (11.6%), March 2021 (11.0%), and April 2020 (11.9%). The low million appears to be where this growth is coming from. Homes above $1.7 million actually saw a sharp drop off in sales.
Canadian New Home Luxury Demand Has Been Tapering
The luxury market for newly-built homes is seeing a disproportionally large slowdown. There were 302 homes absorbed with a price of $1.7 million or greater in April, down 13.0% from the month before. Compared to last year this is a decline of 25.4%. It’s a bit odd, considering the base effect led to a lull in sales, not an acceleration. This should have seen lower sales last year, but they came in higher.
Overall, home sales have been slowing down from record numbers earlier this year. From existing-homes, to newly built ones, it appears a lot of demand has caught up. Luxury is leading the trend, which is something to watch further. If the forecasts for new home starts are correct, a further decline in new home sales should follow.
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If you had the money, you scalped on developer fear last year. You could almost talk developers into a $500k price cut on a $3M home. Good luck doing that today. I’m guessing a $1m new build was a $500k one last year.
If you have a $2 million home, it’s probably not your first rodeo, and you snatched that sub 2% mortgage rate as quickly as possible. Looking at a rising outlook, there’s a lot less reason to panic pull the trigger as soon as possible.
Where is this place for 300k – 400k… I call BS
The $300,000 to $500,000 is really big with investors out West, looking for a two or three-bedroom in Calgary. Nice yields too.
“The West will rise again!”
kidding, but places like Alberta are either severely undervalued, or the whole country is severly overvalued. I’m betting it’s the latter, but I can see the government try to convince people it’s the former.
“priced.” As opposed to unpriced homes, that are free?
Priced as opposed to developer inventory that’s sold (to the developer), without a market price attached for release at a later date.
My take is Toronto and Vancouver are way over priced and due for a correction. However if you is to sort major cities by average house hold median income then examine their average house to income ratio you will find there are lots of good investment cities out there.
I think the smart thing would be to avoid Toronto and Vancouver and invest in other cities.
It’s amazing how a measly 150k home sales annually can influence the wellbeing of the Canadian economy.
Once elections are done, it will be interesting to see how much support Govt./BoC will provide to keep the housing market afloat. Attracting skilled immigrants will also be hard, already a whole lot of people are moving to US, sell in Canada and one can buy a home mortgage free in US plus some change.