Canadian new home prices up by 0.3% in May
Tony Wong – Yourhome.ca
Dennis Au-Yeung has heard the doomsday predictions of the housing market. In particular, that too many condominiums are being built in the city of Toronto.
Prepared for a less torrid market, the Chief Financial Officer of Concord Pacific Group Inc., the largest condo builders in Canada, did not expect line ups for his latest project, Tango at Concord Park Place in North York last month.
But within a day the 250 units he had put up for sale had sold out.
“I really didn’t get this kind of response, we had actually expected the market to soften a little,” said Au-Yeung.
Au-Yeung thinks the strong response is because some buyers have been priced out of the downtown market and there hasn’t been as much supply in areas outside the core. The average selling price was $440 per square foot compared with over $500 downtown.
“I think affordability is certainly an issue,” he said.
According to a Statistics Canada report Thursday, new home prices are up across Canada and particularly in Toronto where condominium sales have been strong.
Prices of new homes in Canada rose by 0.3% in May over April, according to the report.
This is the third month in a row of identical price increases, as new home builders continue to report strong market conditions.
Prices increased the most in Regina, followed by Toronto and Oshawa according to Statscan.
“Builders reported that they increased their prices as a result of higher material and labour costs as well as increased land development,” said Statscan.
The Toronto market, which accounts for a third of all new housing development reported a 0.7% increase, well above the national average.
Year over year, Toronto new home prices are up by 3.2%. Vancouver housing prices remain the market leader, with a 5.8% gain year over year.
“It is a little strange that the resale market seems to be softening, but we’re still going strong,” said Au-Yeung. “But we also haven’t had the big price increases.”
New home price increases have been restrained in comparison to the existing home market. Buyers trying to take advantage of low interest rates and not willing to wait for new product have bid up the prices on resale homes.
The average price for June transactions for existing homes was $435,034, or up 8% from June of 2009 according to figures released by the Toronto Real Estate Board this week. However, sales fell for the second straight month in a row.
The new condo market on the other hand, has been targeted by investors who are willing to wait several years for new product before renting or divesting of the asset. That could also be problematic as some analysts have said there are too many units under completion for the market to absorb.
“A cooling off of housing prices is likely to occur in June in response to the May jump in mortgage rates, a cooling off of global commodity prices, and the impact of the harmonized sales tax,” said Arlene Kish, senior economist of HISIHS Global Insight.
As a result, new home prices are also expected to ramp down in the third quarter.
“Canadian housing activity is moving into reverse,” said David Rosenberg, chief economist at Gluskin + Sheff and Associates in Toronto. “It looks like the impact of modestly higher interest rates and Canada Mortgage and Housing Corporation’s incremental moves to tighten up its underwriting guidelines have taken the steam out of the real estate market.”
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