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Higher interest rates that created lacklustre demand and slowed home sales in London also appear to be forcing prices on new homes to drop, the latest market snapshot from Statistics Canada shows.
According to the federal agency’s latest new housing price index – representing changes over time in the selling price of new residential houses – prices for new homes in the London area have dropped by 1.2 per cent during the past year.
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Since August 2022, when the market peaked locally, prices have dropped by about 3.1 per cent, reversing years of steady increases.
It’s a reflection of a housing market still grappling with the ripple effects of higher interest rates, which only this year began dropping as inflation was brought under control.
“Reviewing the comments that we received from our respondents over the past year, it’s what you would expect: They’re talking about it being a tight market, and now there is more negotiation with the buyers at this point than there would have been in the past,” said Roland Hébert, an analyst with Statistics Canada.
“So, the factors that would affect the resale market would be similar to those impacting the new housing market as well.”
London isn’t alone in this regard.
Besides Oshawa, which saw prices go up by 0.4 per cent in the past 12 months, and Windsor, whose price index remained the same, all other Ontario markets saw declines. The Kitchener-Cambridge-Waterloo region topped the list with new homes selling almost three per cent cheaper than a year ago.
Though market conditions may be bringing prices down, developers seem to be anticipating a surge in demand, especially after the Bank of Canada slashed interest rates by half a percentage point to 3.75 per cent.
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According to the Canada Mortgage and Housing Corp., there have been 3,002 housing starts in the London region up until September of this year, a 73 per cent increase over the same period in 2023.
Though the majority of new builds involve multi-unit housing, even construction of single-family homes is up locally, with CMHC reporting 415 new homes started as of September compared to 367 last year.
Both figures contrast provincial trends, with Ontario and also British Columbia seeing decreases across all housing types.
“Despite the increase in housing starts in September, we remain well below what is required to restore affordability in Canada’s urban centres,” Kevin Hughes, CMHC’s deputy chief economist, said in a statement.
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