Canadian new home prices are on a tear, as high demand meets higher material costs. Statistics Canada (Stat Can) data shows new home prices advanced sharply in May. The annual rate of price growth is now at the highest level since 2006. That makes it one of the fastest annual rates of growth in history.
Canadian New Home Prices Are Up 11% From Last Year
Canadian new home prices grew at less than half the rate of existing homes, and it was still massive. New home prices made a monthly increase of 1.4% in May, bringing the annual change 11.3% higher. It was the largest annual increase for new home prices since November 2006. All 27 markets tracked by the agency showed year-over-year increases.
Canadian New Home Price Annual Change
The annual percent change in new home prices across Canada.
Source: Stat Can; Better Dwelling.
Breaking down new home prices, the cost of the actual house is rising faster than land. Houses excluding land made an annual increase of 12.5% in May. Land only values increased 7.9% from last year. Only being a relative term here, since that’s still large growth.
Fast-rising home price growth is likely due to material costs. Both rising material and labor costs are squeezing builder costs higher. It’s beginning to show some signs of relief, which will either improve profits or lower costs. Buyer’s choice. Taking a quick peek at lumber helps with understanding the situation.
Markets Are Seeing New Home Prices Rise Up To 5% In A Month
Prices made very large monthly increases. The biggest gains for May were in Winnipeg (+5.1%), Kitchener – Cambridge – Waterloo (+4.3%), and London (+4.1%). Remember, this is the monthly increase — not an annual one. Price increases in these markets are so large, they would make decent annual gains. As monthly increases, its borderline comical.
Canadian New Home Price Monthly Change
The annual percent change in new home prices across Canada for May 2021, broken down by major market.
K-C-W = Kitchener-Cambridge-Waterloo, S-F-M = Saint John – Fredericton-Moncton.
Source: Stat Can; Better Dwelling.
Canadian New Home Prices Are Rising Up To 27%
Southern Ontario’s new home prices are showing growth that would be hard not to call frothy. The largest annual gains were in Kitchener-Cambridge-Waterloo (+27%), Ottawa (+24.8%), and Windsor (+20.6%). It’s really hard to emphasize how big a 20% annual price increase is. US peak annual growth during the 2006 housing bubble was less than 15%, and it was considered alarming. That kind of growth seems rational to most of Canada somehow.
Canadian New Home Price Annual Change
The annual percent change in new home prices across Canada, broken down by major market.
K-C-W = Kitchener-Cambridge-Waterloo, S-F-M = Saint John – Fredericton-Moncton.
Source: Stat Can; Better Dwelling.
Toronto and Vancouver’s new home price growth looked modest compared to other markets. Toronto’s new home prices showed monthly growth of 0.4% in May, and annual growth of 6.9%. Vancouver was a little more robust, with a monthly gain of 0.8%, and annual growth 13.1%. With the exception of Vancouver’s annual growth, these numbers underperformed national ones.
Canadian new home prices have been booming amidst record homebuilding activity. This is providing an additional squeeze on materials and labor costs. In the short term, it’s creating a lot of pressure for new home prices to rise. It’s even starting to finally show up in the inflation numbers, albeit not at the level you would expect.
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Absolutely ludicrous. Like developers would ever cut prices just because material costs fall, but they’ll ask you for extra to cover the costs.
In the US they just paused on building. In Canada they started to ask for more money as quickly as possible. Who knows if they even purchased anything yet. They should have to show everyone an invoice for any additional costs. Too bad our politicians are basically owned by these guys.
Friend just got hit up for another $50,000 for “rising material costs.” Prices are falling, but they have an incentive to try to lock in the premium now while people see the higher cost narrative play out.
How is this “transient” as the Bank of Canada would say, while they think prices can’t fall either? It’s permanent, prices just won’t rise at this rate forever. These people…
There is deflationary pressure given the velocity of money at an all time low, while pandemic shortages artificially drove up prices to cause transient inflation. Once supply levels out it will be clear this is all smoke and mirrors, and low rates can only pull forward demand for so long before the music stops. Check M2 Velocity statistics from the Fed and draw your own conclusions about so called liquidity from increased M2 – It’s sitting in the banks, savings accounts, real estate, and the stock market right now, not adding productively to GDP. Not to mention the unemployment figures. BoC probably feels like an year estate activity is the only sign of life left in the patient, hence their seeming indifference. Most people are looking at M2 and ignoring velocity. Big mistake. Agreed to a previous comment about developers trying to lock in gains now. Most folks feel like they should be grateful to even get on the real estate bandwagon so they will pay it thinking it will pay for itself long term. Crazy world.
I said it many times, the entire world printed tons of money. Its not just Canada, its the whole world. We printed tons of money where did it go? Millions lost their jobs, middle class certainly didn’t get any raise. Its the wealthy buying up real estate.
Dont expect real estate prices to drop in this kind of environment. Thats like asking a forest to grow in a desert.
Literally everything is falling in price right now except for inflation driven by gasoline and home prices, so your narrative still doesn’t make sense. Even if you repeat it every day.
a great example of delusional thinking.
it happened so many times before.. 1 year after printing inflation, absorption will take about 2 years
Bubble is going to burst!
Just my take but the crash won’t be an ” event” it’s going to be a process, which yes has begun. And it won’t just be one factor causing it, but an accumalative effect of several factors. The first is INFLATION. Remember the 1991 crash wasn’t just low lending standards it was close to$100 a barrel oil and the inflation of gas prices, heating oil, diesel and on down the line …the grocery store etc suddenly people had to choose between paying the mortgage and FOOD or gas . 2nd on my list of causes …THE PRICES ! At 850k it’s hard to see yet anbother 10% increase to $935k and when interest rates go up just a tick, the pool of buyers at 935k really is diminished. So my 3rd reason for the crash is INTEREST rates. 4th reason is the coming stock market corrections. Lots of money from the stock market gains going into real estate. When the stock market corrects the investment money stops. 5th reason is the end of COVID relief, all the stimulus checks, forbearance for home owners, no evictions for renters, when the support beams are kicked out, the economy cant support $850,000 ” starter homes” . My final reason is…sellers arent listinbg because they will miss out on the gains. When the market levels and the gains stop…..sellers are going to LIST FOR SALE.