New home prices edge lower

Prices for new homes fell 0.5 per cent in March from a month earlier, with the biggest dips in Calgary, Edmonton, Vancouver and Victoria, says Statistics Canada.

The decline was the sixth month-over-month drop in a row, and was exactly as analysts had been projecting, and comes on the heels of a 0.7 per cent drop in February.

New housing prices are now 2.4 per cent lower than a year ago, Statscan said. It's the third month in a row for year-over-year declines, and means housing prices in most cities are now lower than they were last year at this time.

On the month, the large price declines in Alberta were mainly linked to lower material and labour costs, as well as lower lot prices from developers – and not to weakening demand. New homes in Calgary and Edmonton were 1.2 per cent lower in March than February.

But in Vancouver, where new homes fell 1.1 per cent from February, and Victoria, where prices were 0.9 per cent lower, competition and slow market conditions were the main causes, Statscan said.

Month-over-month prices also fell in the area around the auto manufacturing city of St. Catharines, Ont., as well as in Saskatoon, Charlottetown, Toronto and Hamilton.

St. John's, on the other hand, saw yet another increase in its new housing prices, entrenching that city's position as the biggest gainer for the year. New house prices rose 0.4 per cent on the month, and are now 20.8 per cent more expensive than a year ago.

Montreal and Quebec City also registered small month-over-month increases.

For the year as a whole, the biggest declines were on the Prairies, with Edmonton, Saskatoon and Calgary registering the steepest year-over-year drop in new housing prices. Vancouver and Victoria have also seen big dips.

On the other side of the roster, aside from St. John's, Regina has also seen significant price increases, rising 12.8 per cent on average over the past year. Quebec City and Montreal are also up, as are Winnipeg, Saint John, Fredericton and Moncton.

The new housing price index is an important factor when it comes to figuring out how much inflation is at work in the Canadian economy, but contains information of limited use when it comes to Canadian homeowners trying to value their assets within individual markets.

Other indices suggest home prices have dropped considerably in the past year. The Canadian Real Estate Association says the average price of a home in Canada was $288,641, or 9.5 per cent lower in March than a year earlier.

The Toronto-Dominion Bank's weighted index of national home prices suggests prices were 8.1 per cent lower in March than a year earlier, but that declines are beginning to moderate.

“In the end, the continued drop in new home prices is a reflection of the overall weakness in the Canadian housing market, and the weak domestic economic conditions and soft labour market conditions [that] continue to sap housing demand,” commented Millan Mulraine, economics strategists at TD Securities.

“Nevertheless, the pace of new home price depreciation is slightly less than those recorded by other Canadian home price measures.”

(prepared by Heather Scoffield/Globe & Mail)