According to Statistics Canada, new home prices for Canada showed some signs of cooling in April from their average increase of 1.1 percent in the first three months of the year, as they rose 0.3 percent compared with March. Prices were up in 10 of the 27 census metropolitan areas (CMAs) surveyed, down in one and unchanged in the remainder of the CMAs from March to April.
The Canada Mortgage and Housing Corporation reported that the quantity of houses under construction increased by 24.0 percent from the first quarter of 2020 to the first quarter of 2022 in Canada. The fourth quarter of 2021 and first quarter of 2022 have recorded the highest levels of residential construction activity on record. This rise in construction activity had impacts on construction costs, pushing up the prices of new homes.
According to the Building Construction Price Index, softwood lumber and labor shortages were strong drivers in rising construction costs in the first quarter of 2022. This was also echoed by many of the builders surveyed, who listed construction costs as the factor that was most frequently behind the latest price increase for new homes.
Regina (+1.7 percent) had the highest price appreciation in new homes among all of the surveyed CMAs in April on a month-over-month basis. Compared with the first quarter of 2020, the quantity of housing under construction in the first quarter of 2022 was up 46.6 percent in Saskatchewan, while employment in the construction industry increased by 8.7 percent over the same period. This level of growth in activity led to labor and material shortages, creating an upward pressure on construction costs within this province.
The second largest gain in the prices for new homes was registered in Calgary (+1.6 percent), supported by continuously tight inventory in the resale market. According to the Calgary Real Estate Board, the overall resale market has had less than two months of inventory since November 2021, while detached homes were at their lowest level of inventory seen in nearly 15 years.
Builders in Ottawa continued to report good market conditions as new home prices were up 1.5 percent on a month-over-month basis. According to the Ottawa Real Estate Board, in April, despite the falling sales and rising listings, the inventory of active listings remained below the one-month level. For comparison purposes, a balanced market has between four and six months of inventory.
The sole decline this month occurred in Montréal (-0.4 percent). According to the Quebec Professional Association of Real Estate Brokers, resale home sales continued to decline in April despite an increase in active listings for single family homes, indicating a softening market.
Year-over-year, national new home prices rose 9.4 percent in April, the smallest growth since March 2021.