Price of new homes in Canada

The price of new homes in Canada increased by 2.1 per cent in September on a year-over-year basis, a slower pace than the 2.3 per cent advance in August but still slightly ahead of economists' expectations.

On a monthly basis, new housing prices rose a bare 0.1 per cent between August and September.

However, the bloom was off in the Edmonton and Calgary housing markets.

“Edmonton recorded a 12-month drop of 5.8 per cent, which was the largest annual decline since July, 1985, while prices in Calgary declined 1.2 per cent,” Statistics Canada reported Monday.

The largest year-over-year increases were in St. John's and Regina, both with gains of 22.7 per cent. However, those housing markets now appear to be moderating, as neither St. John's nor Regina registered a monthly change in September, Statistics Canada said.

“In Saskatoon, the year-over-year increase was 5.5 per cent, once again confirming a trend of deceleration in this city. One a month-over-month basis, new housing prices decreased 2.1 per cent as Saskatoon builders continued to report difficult market conditions,” Statscan said.

On the West Coast, the 12-month increase for Vancouver was 1.4 per cent and in Victoria, contractors' selling prices increased 0.2 per cent year-over-year, up from a 0.3 per cent decline in August. New home prices were 4.3 per cent higher in Ottawa-Gatineau, and 3 per cent higher in Toronto and Oshawa, Ont.

In Quebec, new home prices were up 6.1 per cent, while Montreal prices increased by 4.8 per cent.

Bank of Montreal economist Douglas Porter had expected that, overall, new home prices would moderate to 2 per cent year over year. He had suggested, as well, that new housing starts in October might slip below the 200,000 mark “as building permits are fading and builders have got to react to the steep slowdown in sales at some point.”

However, Canada Mortgage and Housing Corp. reported Monday that housing starts remained relatively strong, declining by 3.1 per cent to 211,800 units in October from 218,600 in September.

“Housing starts remained strong in October and are consistent with our new home construction forecast for 2008,” Bob Dugan, Canada Mortgage and Housing Corp. economist Bob Dugan said in releasing the October figures.

“The slight decrease in housing starts is the result of declines in both single-detached and multiple starts in Ontario,” Mr. Dugan said.

For the first 10 months of 2008, actual starts in the rural and urban areas combined were down an estimated 1.6 per cent from the same period last year.

The seasonally adjusted annual rate of urban starts was down 4.2 per cent in October from the previous month. The biggest drop was in the number of starts for multiple-dwelling units, down 6 per cent to 115,300. Urban single starts were down 1.1 per cent to 69,300 in October.

Housing starts in urban centres were up in Quebec and Atlantic Canada, but down in British Columbia, the Prairies and Ontario.

Royal Bank of Canada economist Paul Ferley said in a research note that expectations had been for a “more pronounced drop” in overall housing starts across Canada.

The month-over-month decline is not surprising, given “the deteriorating housing affordability that commenced last year,” Mr. Ferley said, although the pace of the decline still remains “surprisingly muted.”

However, he added, tight credit conditions are expected to put “downward pressure on new construction through next year, with starts expected to average close to 180,000 in 2009.”

(prepared by Virginia Galt/Globe & Mail)