Canada – New house prices rose a less-than-expected 0.1 per cent in August as Hamilton, Windsor and Edmonton all posted monthly declines.

The lacklustre August reading comes after prices advanced 0.3 per cent in July, Statistics Canada said Tuesday.

House prices are 3.1 per cent lower than they were last year. The biggest declines in the past year have been in the once booming cities of Western Canada, where prices have fallen from their record peak in late 2007. The cities leading the yearly decline are Edmonton, at 11.4 per cent, Victoria, at 10 per cent and Vancouver, with a 7.8-per-cent drop. Saskatoon and Calgary prices have also decreased.

The real-estate market is showing signs of a recovery. The value of building permits rose 7.2 per cent in August, while starts of single homes climbed last month, separate publications showed last week.

Yet “despite the rebound in the Canadian housing market and the dramatic turnaround in existing home prices in recent months, new home prices remain fairly weak,” said Millan Mulraine, economics strategist at TD Securities, in a note.

Prices remain under pressure in the West. In recent months, “some builders in Alberta and British Columbia have offered lower prices, bonuses and incentives to motivate sales in the face of weaker market conditions,” Statscan noted.

The largest monthly decrease in new housing prices was recorded in Hamilton, where some builders cut prices to encourage sales.

On a monthly basis, prices increased the most in St. John’s, Quebec City and Regina. “In St. John’s, some builders adjusted prices upward to be more in line with the value of land within the city,” the report said.

In Quebec, prices rose in lockstep with higher material and labour costs. “Builders moving to new phases of development also raised their prices as the scarcity of available lots has been pushing up land value in this region.”

Over the past year, the biggest annual price increase has been in St. John’s, where houses are on average 7.5 per cent higher than last year. It’s the 10th month in a row that this city has led the country in year-over-year increases.

Houses in Quebec City, Saint John, N.B., Fredericton and Moncton have also appreciated compared over the last year.

Economists had expected August home prices to rise 0.2 per cent.

TAVIA GRANT

Source: The Globe And Mail – Canada