Edmonton and Calgary New Home Prices
New-house prices shoot higher
Prices for new homes shot through the roof in April, recording their largest monthly rise in 17 years.
Statistics Canada said the new housing price index rose by 1.2 per cent from May, the most significant national price increase since April, 1989.
As has been the case for months, Alberta's two major cities drove the increase, as the oil-rich province continues to benefit from an influx of people and a flood of construction that have created tight housing market conditions.
Contractors' selling prices have jumped 8.2 per cent from a year ago on a national basis, Statscan said. The 8.2 per cent year-over-year topped consensus expectations for a rise of 7.6 per cent, and was the strongest 12-month change since the January, 1990, increase of 9.5 per cent.
”New house price gains are trending toward levels not seen since the real estate boom of the late 1980s,” said Ted Carmichael, an economist with J.P. Morgan Securities Canada Inc.
New house prices are being boosted by continued gains in land values, building material prices and labour costs, he said. ”The rise in new house prices will gradually feed into the CPI for shelter, putting steady upward pressure on core services inflation.”
The Statscan report showed that the new housing price gains were widespread, rising in 14 of the 21 metropolitan areas.
Alberta led the charge, with prices in Calgary jumping 4.7 per cent on a month-over-month bases and Edmonton experiencing a rise of 3.9 per cent in May.
On an annual basis, prices for new homes in Calgary surged 34.8 per cent - leading the way for the seventh straight month - followed by Edmonton, which saw a 18.6 per cent rise.
”High demand for new housing, coupled with higher material and labour costs and increased land values, were cited as the main reasons for these increases,” Statscan said.
Stewart Hall, a fixed-income strategist at HSBC Securities Canada Inc., said that growth in new home prices has been running at almost five times the rate of growth for core inflation.
”Rising land prices, labour and material shortages are now constant fixtures in the report, and hint at the existence of bottlenecks in the sector,” he said. ”Despite lofty pricing metrics for housing relative to other domestic pricing measures, there appears to be little concern emanating out of the Bank of Canada that Canada faces an asset bubble in this particular sector.”
Although the market continues to expect the housing sector to settle down over the course of this year, the pace of activity continues to defy expectations, Mr. Hall said.
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