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Canadian new house prices stall after 7 consecutive monthly increases

H.S. Borji
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New house prices in Canada unexpectedly stalled in July, as price growth in eight metropolitan areas were offset by the first decline in the Toronto-Oshawa region since February 2010.

The new housing price index was flat in July, after growing 0.2 percent in June, Statistics Canada reported today in Ottawa. Economists forecast another 0.2 percent gain.

Compared to July 2013, new house prices advanced 1.4 percent, the smallest year-on-year increase since December 2013.

The new housing price index monitors changes in contractors’ selling prices of new residential homes in 21 metropolitan areas. The monthly index tracks single dwellings, semi-detached and row houses. It excludes condominium dwellings.

The index is used by economists to monitor developments not only in the real estate sector, but the construction sector as well.

Gains were led by the St. Catharines-Niagara and London regions, as builders reported stronger market conditions in both areas. Each CMA saw new house prices rise 0.3 percent in July. That marked the third consecutive monthly increase in London and the first since February for the St. Catharines-Niagara region.

New house prices advanced 0.2 percent in the regions of Hamilton, Kitchener-Cambridge-Waterloo and Calgary, official data showed. Higher material and labour costs and stronger market conditions were cited as the main factors for growth in these regions.

Prices declined in the combined Toronto-Oshawa metropolitan region, which accounts for nearly one-third of the overall market. New house prices in this region dipped 0.1 percent, the first monthly decline since February 2010.

Declines were also posted in the National Capital Region, which has seen new house prices gradually fall since March.

New house prices were unchanged in six of the 21 metropolitan areas surveyed, official data showed.

The slowdown in the NHPI suggests Canada’s housing market was gradually cooling, although more evidence will be needed to satisfy the skeptics who believe house prices may experience a correction over the long-term. Earlier this week the Canadian Mortgage and Housing Corporation said it expects overall market conditions to gradually cool in the second half of the year.

“The currently elevated level of inventory of newly completed and unoccupied condominiums, and units under construction, supports CMHC’s view that condominium starts will likely see a declining trend over the coming months as developers and builders seek to limit risks of over-building,” said CHMC chief economist Bob Duggan in a statement dated September 9.

Housing starts for the month of August rose at a seasonally adjusted annual rate of 192,368, down from 199,813 in July, the CMHC said.

The condo market showed little signs of slowing down in July, as construction intentions in Toronto and Vancouver pushed the value of building permits to a surprise record high. The value of authorizations for multi-family dwellings surged 43.4 percent in July to $2.54 billion, Statistics Canada reported earlier this week. The gains were led by a 29.6 percent gain in Toronto and a 46.1 percent surge in Vancouver, official data showed.

Permits for single-family dwellings fell 0.5 percent following three consecutive monthly gains.

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