Canadian new home prices up 1.4 percent in May

Friday, 18 June 2021 18:35:41 (GMT+3)   |   San Diego
       

According to Statistics Canada, new home prices increased 1.4 percent in May nationally, with prices up in 19 of the 27 census metropolitan areas surveyed.

Winnipeg (+5.1 percent) reported the largest monthly increase in new home prices in May. According to the Winnipeg Regional Real Estate Board, demand continued to outpace supply and the active listing supply at the end of May (2,768) was down 40.1 percent compared with the same month a year earlier (4,621).

New house prices in Calgary (+3.7 percent) rose at their fastest pace since July 2006. Part of the increase was attributable to the sale of homes priced at $600,000 or more, which accounted for approximately 26 percent of total new home sales in May. The Calgary Real Estate Board reported an unadjusted benchmark price of $455,200 for resale detached, semi-detached, row and apartment condominium homes in May, up 10.6 percent from a year earlier. This reflects, in part, the decrease in the number of months of inventory.

Builders reported that rising construction costs were contributing to higher new home prices nationally. Western Canada has been especially hard hit by building material shortages due to supply chain issues at lumber and steel mills, as well as rising transportation costs within Canada, and higher US import duties.

Nationally, in May, prices for lumber and other products were up 17.9 percent from the previous month and have more than doubled (+119.6 percent) year-over-year. Prices for fabricated metal products and construction materials were up 2.4 percent from April, and 15.0 percent higher year-over-year.

New home prices continued to increase in Kitchener-Cambridge-Waterloo (+4.3 percent) and London (+4.1 percent) amid strong demand for larger homes.

Price growth slowed in Canada's largest housing markets of Toronto (+0.4 percent), Vancouver (+0.8 percent) and Montréal (+1.4 percent). In May, fewer new and resale homes were sold in Toronto (-12.5 percent), Vancouver (-13.0 percent) and Montréal (-13.5 percent) compared with the previous month.

According to the Canadian Real Estate Association, part of the sales slowdown in May could have been attributable to the lockdowns to slow the spread of COVID-19 in hot-spot regions of the country.

Nationally, new home prices rose 11.3 percent year-over-year in May—the largest increase since November 2006.

New home prices were up in all 27 markets surveyed on a year-over-year basis, with prices rising at their fastest pace on record in Kitchener-Cambridge-Waterloo (+27.0 percent), Ottawa (+24.8 percent) and Windsor (+20.6 percent).

The Office of the Superintendent of Financial Institutions (OSFI) announced that they will tighten the qualifying rate for uninsured mortgages to 5.25 percent, or the mortgage contract rate to plus 2.0 percent—whichever is higher, on mortgages approved on June 1, 2021 and after.

The Department of Finance will align with OSFI by establishing the same minimum qualifying rate for insured mortgages. Minimum qualifying rates ensure borrowers can make their mortgages payments in the event of a loss in income or higher mortgage rates. Under these new rules, borrowing power will be reduced by about 4.0 percent to 4.5 percent.


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