Ottawa leads in new home price increases

Led by increases in Ottawa and Toronto, prices of new homes resumed their upward trend in April. However, the increases could slow as the year goes on, one analyst said.

Statistics Canada said Thursday its new housing price index rose 0.3 per cent in April, for the fifth gain in the past six months. The index has risen 1.9 per cent since last April.

Analysts had predicted new home prices would rise by 0.1 per cent after remaining flat in March.

According to the Statistics Canada report, Ottawa-Gatineau and Toronto were again at the forefront of the gains, with prices in those metropolitan areas rising 1.3 per cent and 0.6 per cent, respectively.

Prices in the Ottawa area are up primarily because of higher material costs, Statistics Canada said, while market conditions drove up prices in the Toronto area.

In a separate report on global real estate trends released Thursday, Scotia Capital economist Adrienne Warren said Canadian real estate prices were up five per cent in the first quarter of 2011 over the same period in 2010, but pointed out that high prices paid by foreign buyers in the Greater Vancouver Area are having a distortionary effect on the national average. Excluding Vancouver, she said, average real prices were up just one per cent year-overyear.

"Housing sales in Canada, while below the record-setting pace seen at the height of the boom in 2005-2007, are being supported by steady job creation and still attractive borrowing costs," Warren said.

"Relatively tight supply is adding to price pressures in several cities.

"Nonetheless, high home prices, the further tightening in mortgage-insurance rules effective mid-March, and the upward drift in fixed-mortgage rates this year appear to have slowed demand somewhat, most notably among first-time buyers.

"We anticipate relatively flat sales volumes and average prices through the latter half of the year."

Prices remained the same in April in only seven of the 21 metropolitan areas covered in the new housing price index.

The most significant monthly declines were seen in Victoria (down 0.8 per cent) and the New Brunswick composite group of Saint John, Fredericton and Moncton (down 0.5 per cent), as builders in these regions lowered prices to entice buyers.

Canada's housing market remains stable, and shouldn't be "much of a driver nor much of a drag on growth in 2011," BMO Capital Markets economist Robert Kavcic said in a note released earlier in the week.