Canadians are flocking to the country’s more affordable housing markets in search of new homes, a trend that helped to push prices higher last month.

In its New Housing Price Index (NHPI) published for March, Statistics Canada reported that demand for new homes in more affordable census metropolitan areas (CMAs) continued to be strong that month.

For the third consecutive month, Calgary recorded the largest month-over-month increase for new home prices, which climbed 4.1% in March. Last month, the Calgary Real Estate Board saw the highest amount of sales on record. Even as new listings increased in March, overall resale inventory was low, a factor that may have persuaded purchasers to look at new home options.

“This market favourable to sellers may have had an impact on the demand of new built homes as the low inventory levels on the resale market may have swayed some buyers towards the new home market, contributing to the rise of new homes prices over the last few months,” said the Statistics Canada report.

Winnipeg reported the second-highest jump in new home prices last month, which rose 3.4% between February and March. Prices in Montréal and Sherbrooke also jumped a little over 3% each month-to-month as the more affordable CMAs continued to experience a shortage of resale homes.

The NHPI monitors changes in selling prices for new residential homes over time that are agreed upon between the contractor and the buyer when the purchase contract is signed. The NHPI is applicable to new single-family homes, semi-detached residences and townhomes.

Overall home prices increase just over 1% in March

In March, new home prices in Canada increased 1.2% month-to-month across the board. Out of the 27 CMAs Statistics Canada analyzes, prices were up in 18 of them and remained unchanged in the other nine.

Canada’s two major cities — Toronto and Vancouver — reported little change between February and March, with new home prices rising only 0.7% and 0.2% monthly in the cities.

On a yearly basis, new home prices rose 11% from March 2021. Prices for new homes in Kitchener–Cambridge–Waterloo increased the most, rising 24.4% annually in March. This CMA has reported the greatest year-over-year increase for the seventh month in a row.

Winnipeg followed closely behind, where new home prices shot up 24.3% year-over-year, marking the largest price increase in this CMA since the beginning of the NHPI series. New property prices also rose 23% yearly in Calgary, the highest growth rate since the price of new homes jumped during the housing market boom in 2006-2007.

Rising construction costs contribute to monthly price increases

The upward costs of common construction materials continues to contribute to rising prices for new homes in Canada.

According to Statistics Canada, most new home builders have continued to cite rising construction costs as the main factor behind price increases. In February, softwood lumber prices were up 8.3% monthly, while prices for energy and petroleum products surged by 10% in January and 8.5% in February. This was reflected in higher transportation costs and operational expenses for heavy machinery.

Demand for New Homes in More Affordable Cities Sends Prices Higher in March by Michelle McNally | Livabl