Cost of New Homes Climbs

Canadians waiting for the price of new homes to ease are going to have to wait a while longer, especially if they are buying in Alberta.

Nationally, the pace of new-house price increases reached 0.9 per cent in January, compared with a rise of 0.6 per cent in December, Statistics Canada said Thursday. On an annual basis, prices jumped 6.6 per cent, the biggest 12-month rise since February, 1990.

“In fact, new-house price gains are moving up toward levels not seen since the real estate boom of the late 1980s,” Ted Carmichael, chief economist at J.P. Morgan Chase & Co., wrote in a report.

New homes in Calgary and Edmonton experienced the biggest price increases, as soaring oil-and-gas revenues and an abundance of jobs continue to lure home buyers to resource-rich Alberta.

Statscan said that across the country, higher prices were driven mainly by rising material and labour costs. In more than half of the cities surveyed, including in Edmonton and Calgary, the land that the houses are being built on are rising in value, and developers are passing the higher lot costs along to home buyers.

Tight competition in metropolitan areas were a factor, Statscan said. “Builders in Regina also cited the cost of developing new subdivisions as a contributor to price hikes, in particular higher servicing costs.”

New homes in Hamilton, Toronto, Oshawa, Kitchener, Windsor, Winnipeg, Montréal and Ottawa-Gatineau were more expensive in January than February, Statscan said, while Charlottetown and the Greater/Grand Sudbury and Thunder Bay areas saw prices dip.

Canada's housing market has been booming in recent years, and experts are now forecasting that it will cool in the coming months.

However, the new home prices increases will “gradually feed into the consumer price index for shelter, putting steady upward pressure on core inflation,” Mr. Carmichael said.