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The price of a new home in Canada rose again in April, but to a lesser extent compared to previous months.
Last month, new home prices “showed some signs of cooling,” as they increased 0.3 per cent month-over-month according to the April New Housing Price Index (NHPI) published by Statistics Canada. This is a slowdown from the average increase of 1.1 per cent that was recorded during the first three months of 2022.
On a yearly basis, new home prices increased 9.4 per cent in April, the smallest growth rate since March 2021.
The NHPI monitors changes in selling prices for new residential homes over time, and is applicable to new single-family homes, semi-detached residences and townhomes in Canada.
New home prices rise in most metro areas
Prices in 10 of the 27 census metropolitan areas (CMAs) included in the NHPI grew in April, while new home values dropped in one CMA and remained unchanged in the others.
Regina reported the most growth in new home prices last month, where values rose 1.7 per cent in April. Compared to Q1-2020, the number of homes under construction in Saskatchewan has grown 46.6 per cent in Q1-2022. Meanwhile, employment in the construction industry has risen 8.7 per cent over the same period.
“This level of growth in activity led to labour and material shortages, creating an upward pressure on construction costs within this province,” the report said.
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Ranking behind Regina, Calgary had the second-highest new home price appreciation in April as prices rose 1.6 per cent month-to-month. This trend was spurred by continuously tight inventory in the resale market, which has had less than two months of inventory since November 2021, according to the NHPI.
In Canada’s other large cities, new home prices jumped in Ottawa–Gatineau, Edmonton and Vancouver by 1.5 per cent, 0.5 per cent and 0.2 per cent from March to April. New home prices in Toronto stayed the same month-to-month, and dropped 0.4 per cent in Montréal.
Between 2021 and 2022, Winnipeg reported the highest year-over-year increase in new home prices during April, which grew 21.9 per cent annually. This was followed by Calgary and Kitchener–Cambridge–Waterloo, where prices jumped 21.7 per cent and 19 per cent over the time period.
Higher construction activity equals growing costs
With more homes being built across the country, the cost to build is also rising in tandem.
According to data from the Canada Mortgage and Housing Corporation (CMHC), the quantity of houses under construction increased 24 per cent between Q1-2020 and Q1-2022. In Q4-2021 and Q1-2022 particularly, there was 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,” explained the NHPI report.
Building Construction Price Index shows that softwood lumber and labour shortages were key drivers of rising construction costs during Q1-2022.
“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,” said the report.