New home prices dropping as real estate market softens

Prices for new homes in Vancouver dipped slightly between April and May but still remain higher than a year ago, Statistics Canada reported Friday.

The latest housing price index report showed the national rate of price growth for new homes -- at 4.1 per cent -- had shrunk to its lowest level since 2002, largely because of softening markets in the west.

In Vancouver, new home prices rose 2.7 per cent in May from the same month a year ago. Yet this is a far cry from May last year, when new home prices jumped 8.8 per cent from the same month in the previous year, said Statistics Canada analyst Neil Killips.

"The index had been rising steadily until about a year ago," Killips said, "and it's been a steady decline since then."

In Victoria, by comparison, new home prices were unchanged from a year ago.

Cameron Muir, chief economist for the B.C. Real Estate Association, said slowing sales and an increase in the number of resale homes on the market is having an effect on prices and making it tougher for builders.

"Builders and developers have to sharpen their pencils, as [resale] home sellers are doing, in order to have their product priced to today's market and get their units sold," Muir said.

Peter Simpson, CEO of the Greater Vancouver Home Builders' Association, said some smaller companies that had listed projects at prices "a little higher than they perhaps should have," may be reducing their asking prices.

"But I'm certainly not seeing that in any wholesale manner for sure," Simpson said.

He added that builders do not have a lot of room to discount prices because of high land costs and rising labour rates and material costs.

Elsewhere in Canada, new housing prices also dropped between April and May in Edmonton and Calgary. In Edmonton, however, prices were still up 3.3 per cent in May from one year ago. In Calgary, prices were still up 0.6 per cent from the same month in 2007.

The federal agency said May's weak performance continues "a deceleration that started in September 2006." In April, the year-over-year increase in prices was 5.2 per cent.

While prices in Alberta and B.C. slowed from their previous highs, Saskatchewan continued to experience the largest increases, with Regina posting a 30.4 per cent's annual increase in May.

"Builders reported that higher labour and material costs have pushed prices higher over the past year," Statistics Canada said.

(prepared by Derrick Penner/Vancouver Sun)

HOUSE PRICES

May 2007 to May 2008

Canada total +4.1 0.0
Vancouver +2.7 -0.3
Victoria 0.0 -0.6
Calgary +0.6 -0.9
Edmonton +3.3 -1.9
Saskatoon +30.2 +0.5
Regina +30.4 +1.3
Winnipeg +16.1 +1.8
Toronto-Oshawa +4.1 -0.1
Ottawa-Gatineau +3.5 +0.5
Montreal +5.7 +1.8
Halifax +6.7 +0.4
St. John's +18.8 +3.6

Source: Statistics Canada