The market for resale homes was weakening in many major Canadian cities leading up to the tightening of mortgage credit conditions by Ottawa. But when it comes to new home sales—the indicators continued to be relatively strong—a trend that continued through June.
According to Statistics Canada, the national New Home Price Index (NHPI) rose 2.3 per cent in June relative to the previous year. June’s increase was consistent with the post recession upward trend. In 2011, for instance, the average monthly annual growth in the national NHPI was 2.4 per cent.
June’s increase was mostly driven by gains in Toronto where the year over year price increased 5 per cent. In Alberta’s major markets, Calgary and Edmonton, the NHPI has been particularly flat during the recovery. Calgary has registered a 1.7 per cent increase. In Edmonton, the annual increase was only 0.8 per cent.
Alberta’s wages have been rising at a pretty healthy pace (especially relative to other provinces) and it looks like builders are reluctant to pass those costs on. Not passing on those higher costs is likely due to some of the excesses that had built up during the boom years, with a lot of competition on the resale side. It looks like some of that excess is now beginning to burn off.
Alberta has long been an outlier in the Canadian housing market. And while it’s expected that prices
for new homes in Toronto will follow resale prices under the new mortgage rules—that may not occur in Wild Rose country.*
*Will van’t Veld, Economist, ATB Financial