The average national price of a new home edged higher in October, but some of Canada's priciest cities — Toronto, Victoria and Calgary — experienced a drop in prices.
In oil-rich Calgary, where double-digit increases were until recently the norm, prices dipped 0.5 per cent from September — the first fall since November, 2004, Statistics Canada said Monday.
On a national basis, Statscan said the price tag for a new home edged up 0.2 per cent in October from September — the smallest monthly increase since July, 2005. Economists were expecting a rise of 0.5 per cent.
The strength of the Alberta housing market has been unrelenting. The boom in energy prices triggered a wave of migration, leading to a surge in demand and prolonged construction times that have sent prices higher and higher.
Contractors' selling prices have jumped 11.4 per cent over a one-year period, and Calgary's bustling housing market has been a large part of the reason. One a one-year basis, Calgary has seen the largest surge in new home prices, posting a 53.5 per cent gain. Edmonton is next on the list, having posting a 41.1-per-cent rise.
The new housing price index data released Monday provides further evidence that after years of firing on all cylinders, Canada's housing market is finally cooling.
Derek Burleton, economist with Toronto-Dominion Bank, said prices are starting to flatten from what has been a very steep upward trend. “We have seen some sales slowdown in the resale markets and that appears to be making its way through to new housing.”
In central and eastern Canada, the real estate market appears to have pulled off a soft landing, while activity in Alberta and B.C. has been “unsustainably strong,” he said. Prices in major western cities including Calgary, Edmonton and Vancouver have surged rapidly, pinching affordability and pricing some home buyers out of the market.
In Calgary, there are indications that re-sale activity has started to pull back and listings are improving, Mr. Burleton said. “So while it is still an extremely tight market, it is inching closer to a balanced market.”
Calgary was not the only city where prices fell in October. In Victoria, they eased 0.5 per cent from September. Toronto new home prices dipped 0.1 per cent while Windsor saw the largest price drop — 0.7 per cent.
“As evidenced by the year over year strength, the Calgary housing market has been one of the chief driver's of the overall new home price index,” said Stewart Hall, market strategist with HSBC Securities (Canada) Inc.
The Bank of Canada “will take some comfort from the deceleration in prices given that house prices have provided some of the upside event risk to the inflation outlook (housing prices and household demand to be exact),” he said.
New home prices did rise in 11 of the 21 major metropolitan areas surveyed by Statscan. Edmonton led the price gains with a rise of 2.2 per cent, followed by Winnipeg, where they rose 0.6 per cent. In Vancouver they increased a slimmer 0.5 per cent.
“Higher costs for construction materials, labour rates and an active housing market continued to be factors driving prices,” Statscan said. “Increased lot values, mostly due to land shortages, were also a contributing factor in both Winnipeg and Edmonton.”
A government report released Friday showed that housing starts climbed less than 1 per cent to 225,000 units from 223,200 units in October. Economists were expecting a rise of 220,000.
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