Declining prices and continued low mortgage rates are offering a pleasant surprise these days for Albertans in the market for a new house.The Calgary census metropolitan area recorded the third-steepest year-over-year decline across the country in new house prices in March, according to Statistics Canada.
In reporting its new housing price index on Monday, the federal agency said contractors’ selling prices decreased by 2.4 per cent nationally from March 2008 to March 2009.
The biggest 12-month decline was in Edmonton at 12.3 per cent, followed by Saskatoon at 11.2 per cent and Calgary at 8.7 per cent.
“Albertans in the market for a new house these days may be in for a pleasant surprise,” said Todd Hirsch, senior economist with ATB Financial in Calgary.
“This downward price trend has been accelerating over the past nine months,” he said.
Hirsch said the lower housing prices are part of a pattern of price correction across Alberta, similar to the moderation in prices for existing homes. New housing prices in the province had shot up dramatically during 2006 and 2007, rising by well over 50 per cent in some reporting periods.
“Those price increases were due to extremely strong in-migration and an overheated real estate market,”said Hirsch. “Now we are seeing prices for new homes falling. That reflects not only the cool-down in the real estate market, but also falling costs for builders.
“On the surface, falling new home prices may seem negative for Alberta’s economy, but in fact it is more positive.The lower new home prices will help encourage more inter-provincial migrants to settle in the province, which will boost overall economic activity.”
The peak for year-over-year overall change in new home prices was in August 2006 at 60.6 per cent for the Calgary market.
The Calgary census metropolitan area includes the city, Airdrie, the Municipal District of Rocky View, Chestermere, Cochrane, Irricana, Beiseker and Crossfield.
The house only component in the Calgary region saw a 12.8 per cent drop from a year ago, while the land only component was off by only 0.5 per cent.
“This is the first time the land component has decreased in quite some time,” said Lai Sing Louie, senior market analyst in Calgary for Canada Mortgage and Housing Corp. “Builders have quite a lot of lots in the city and there is pressure from the resale market in terms of pricing.”
He said further price declines are expected.
The year-over-year change for the house-only component of the new housing price index for the Calgary region peaked at 66.1 per cent in August 2006 while the peak for the land-only component was 49.6 per cent in September 2006.
Nationally, the annual change for the house-only component fell by 3.6 per cent while the land only component decreased by 0.4 per cent.
The biggest year-over-year increases in Canada overall in March were in St. John’s, N. L., at 20.8 per cent and Regina at 12.8 per cent.
Calgary and Edmonton also showed the biggest monthly declines of 1.2 per cent from February to March.
“In Calgary and Edmonton, declines were attributed to lower material and labour costs and lower lot prices from developers,” said StatsCan.
Across the country, new home prices declined for the sixth consecutive month, said Millan Mulraine, economics strategist with TD Securities.
“The continued drop in new home prices is a reflection of the overall weakness in the Canadian housing market. And the weak domestic economic conditions and soft labour market conditions continue to sap housing demand,” he said.