After a slight slowdown in December 2021, new home prices continued to trend upwards last month, a phenomenon that could be driven by lower levels of home supply.

Statistics Canada recently released its New Housing Price Index (NHPI) for January 2022, which shows that new home prices grew 0.9% nationally month-to-month. This is an increase compared to December, when property prices were up 0.2% across Canada, the lowest growth rate recorded since June 2020.

Of the 27 census metropolitan areas (CMAs) surveyed in January, prices were up in 15 of the regions and remained unchanged in the other 12.

On a yearly basis, new home prices rose 11.8% in January compared to the same period in 2021. Annually, the Kitchener–Cambridge–Waterloo CMA reported the strongest year-over-year price growth at 27%. This was followed by Winnipeg at 22.5% and Windsor at 21%.

The NHPI, which follows trends for new single residences, semi-detached homes and townhomes, measures changes over time in the selling prices of new residential homes that are agreed upon between the contractor and the buyer at the time when the purchase contract is signed.

Low inventory causes regional home prices to surge

By province, British Columbia and Alberta reported the highest monthly price increases, where home values grew at 1.7% from December to January in both provinces. Prices were also up by 2.1% in Calgary and 1.8% monthly in Vancouver. Meanwhile, new home prices were unchanged in Toronto, Montréal and Hamilton month-to-month in January.

According to the Calgary Real Estate Board, inventory levels have been at lows not recorded since 2006. On the demand side, Calgary continues to be more affordable compared to other major Canadian cities, a feature that continues to attract buyers. Migration to Alberta has also played a role in fueling the market — in Q3-2021, the net number of interprovincial migrants and immigrants reached its highest level since the Q2-2015 with 16,406 arrivals, according to Stats Canada.

Over in Vancouver, January’s increase in prices represents the fastest monthly price acceleration since May 2017. Although last month’s home sales were down from the record-setting pace established a year earlier, the Real Estate Board of Greater Vancouver reports that low property supply has “continued to push home prices into record highs.”

High construction costs persist in Canada

Canada’s new home market continues to deal with higher-than-normal costs to build.

In December 2021, Stats Canada’s Industrial Product Price Index recorded the strongest-ever monthly increase for softwood lumber prices, which climbed 32.8%.

In its fourth quarter Housing Market Index Survey, the Canadian Home Builders’ Association (CHBA) stated that elevated costs for lumber and other construction materials have boosted the average costs of construction by 13% as of Q4-2021 compared to Q3-2021.

“It was also reported that supply chain issues, labour shortages, and low supply of developed lots in some areas were affecting the housing industry,” noted the report. “Survey respondents identified that plumbing materials as well as plumbing fixtures were the most impacted by the supply chain issues.”

Low Supply Helps Push Up Canada’s New Home Prices in January by Michelle McNally | Livabl