While Canada’s resale home market indicated a cooldown in May, new construction property prices continued to trend upward thanks to higher building costs.
In its recently-released New Housing Price Index (NHPI) report for May, Statistics Canada stated that new home prices across the country increased 0.5 per cent between April and May. This follows a 0.3 per cent hike in prices that occurred the previous month.
The NHPI monitors changes in selling prices for new residential homes over time that are agreed upon between the contractor and the buyer when a purchase contract is signed. The NHPI is applicable to new single-family homes, semi-detached residences and townhomes.
Of the 27 census metropolitan areas (CMAs) Statistics Canada analysed, 14 CMAs saw their prices jump on a monthly basis in May while prices in the other half of the CMAs stayed unchanged. Compared to 2021, new home prices in Canada grew 8.4 per cent year-over-year in May, the smallest increase since March 2021.
By comparison, it appeared to be a different story for Canada’s resale market in May as both prices and sales fell.
The Bank of Canada hiked its policy interest rate in April and May, a decision that caused “potential buyers to face higher mortgage rates,” the report said. After these rate increases, the Canadian Real Estate Association (CREA) reported that the country’s resale segment “showed signs of cooling,” as monthly home sales tumbled 8.6 per cent between April and May. Similarly, the benchmark price for resale homes dropped 0.8 per cent monthly.
“In May, rising construction costs continued to push new home prices up,” stated the NHPI report. “However, the increasing mortgage rates seem to have had a larger impact on the resale market than on the new build market, reducing demand and prices of resale properties.”
Growing construction costs support new home price growth
Higher costs for building materials continues to be a main factor behind rising new home prices.
Lumber and other wood product prices reported a 19.3 per cent yearly decline, but Statistics Canada noted that this was “not enough to offset the rising costs of other building materials in May.”
Compared to May 2021, prices for energy and petroleum products were up 78.5 per cent, as were fabricated metal products and construction materials (23.2 per cent), cement, glass, and other non-metallic mineral products (8.7 per cent).
New Halifax homes report strong price increases
Out of the 27 CMAs, Halifax experienced the highest monthly increase in prices, rising 2.4 per cent in May. This marks the biggest jump in new home prices since February 2021.
Part of this may be related to changes in Halifax’s population. Nova Scotia experienced a net increase of 4,487 people in its population during Q4-2021, comprising 2,430 international migrants and 2,057 interprovincial migrants. CREA reported that sales activity was up in Halifax during May. Meanwhile, the MLS Home Price Index benchmark price for a single-family Halifax home was $541,900 during the same month, significantly lower than the national composite of $822,900.
“Increases to net migration and the relative affordability of home prices in the region compared to the rest of Canada may have contributed to the high housing demand amid a tight supply,” explained the NHPI report. “Additionally, bidding wars which started last year were still ongoing in Halifax, applying upward pressure to home prices as buyers tried to secure a home.”
Following Halifax, St. Catharines–Niagara and Windsor recorded the second-highest monthly growth in new home prices, which were up 1.7 per cent in both cities during May,
On an annual basis, Calgary reported the greatest year-over-year increase in new home prices, which were up 18.9 per cent during May. Winnipeg and Kitchener–Cambridge–Waterloo also reported strong year-over-year price growth, at 17 per cent and 14.2 per cent during the same month.