• The new housing price index fell 0.1% in July—the first decline in 13 months.

• The monthly decline was led by falling prices in Vancouver, London, Greater Sudbury, and Thunder Bay.

• Despite the dip in the index in July, new home prices are still 2.9% higher versus a year earlier.

• Prices increased in only 3 of the 21 metropolitan areas on a monthly basis.

Outlook

Canadian new home prices fell 0.1% in July as the impact of the harmonized sales tax (HST) came into effect. This dip was the first decline in new home prices in 13 months.

For the most part, home prices were unchanged in the month, with the exception of large swings in some metropolitan areas in Ontario and British Columbia. Within Ontario, new home prices in Greater Sudbury and Thunder Bay (down 1.9%), London (down 1.8%), and Windsor (down 1.5%) dropped the most. In British Columbia, the 0.8% decline in home prices in Vancouver weighed the most on the total index.

Despite the dip in the index in July, new home prices are still up 2.9% from a year earlier. Provincially, new home prices are up, with Saskatchewan and Manitoba on top of the leader board. Home prices in Regina jumped the quickest, rising 6.9% from a year earlier.

Prices rose in only 3 of the 21 metropolitan areas. Demand for homes in the Kitchener-Cambridge-Waterloo metro remains robust as prices jumped 0.6% in the month. Winnipeg and Victoria also recorded decent gains.

The new housing price index does not include value-added taxes, such as the HST, so in its calculation, monthly declines in the index over the next year for homes, especially in Ontario and British Columbia, are not necessarily signs of a downtrodden housing market. Nevertheless, we think that the expected slowdown in housing demand in general will have a cooling effect on prices.