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By Brian Morton, Vancouver Sun March 9, 2011
VANCOUVER - New home prices across Canada increased by 1.9 per cent from January 2010 to January 2011, but in Metro Vancouver the increase was just 0.2 per cent and in Victoria prices fell by one per cent, Statistics Canada reported today. The data gathering agency reported that prices increased the most in the metropolitan regions of Toronto and Oshawa, Montréal and Ottawa-Gatineau. In Western Canada, Regina, Calgary and Edmonton price increases all exceeded Vancouver's increase. Nationally, prices were up 0.2 per cent during the month, compared to a 0.1 per cent advance in December, the federal agency said, with no change during the month in Vancouver and Victoria. Year-on-year, prices rose 1.9 per cent in January. Both readings were roughly in line with economists' forecasts. Recent data have pointed to a slowdown in Canada's housing market. On Tuesday, Canada Mortgage and Housing Corp. said new home construction rose 6.6 per cent in February, but economists have cautioned that those gains are unlikely to be matched in the coming months. "Land prices have gone nowhere in the past three years after big gains in the previous three, suggesting speculators are largely absent from the market," said BMO Capital Markets economist Sal Guatieri. Along with tighter mortgage rules - including shorter amortizations - that come into effect March 18, higher interest rates, lower affordability and elevated household debt, "should keep house prices on a tight leash," BMO said in a report last week. This week, Statistics Canada reported that the value of building permits unexpectedly fell 5.1 per cent to $5.4 billion in January, following a gain of 2.6 per cent in December, due to weaker residential and non-residential activity. As well, a Canada Mortgage and Housing Corp. report released this week concluded that housing starts in B.C. were down in February, although they rose in Metro Vancouver. Still, a Royal Bank of Canada survey released Wednesday showed 90 per cent of Canadians are confident in the country's real estate market. Almost three-quarters of respondents in the RBC poll said they are well positioned to withstand a decline in the housing market. Meanwhile, Canadian builders can expect a third consecutive year of lower profits in 2011 as spending on new homes declines, according to The Conference Board of Canada's Canadian Industrial Outlook: Canada's Residential Construction Industry - Winter 2011, which was also released Wednesday. "New mortgage lending rules, elevated levels of consumer debt, and anticipated mortgage rate increases are some of the factors restricting new home sales this year," Michael Burt, associate director, industrial economic trends, said in a statement. "Demand will begin to pick up next year as the effects of lending policy changes fade. But housing starts are not expected to return to pre-recession levels of more than 220,000 units per year." According to the report, housing starts are expected to average 175,000 units this year, down from 190,000 in 2010. With starts not expected to return to their pre-recession levels, renovations and repairs will account for a growing share of industry revenues. As eel, containing costs will continue to be an issue for the industry as prices for building materials are on the rise and skilled trades shortages are expected to lead to above-average wage growth. Industry costs will dip by 2.3 per cent this year because of slower pace of building, but they will rise steadily beyond 2011. Pre-tax profits are expected to fall by 5.3 per cent to $1.8 billion in 2011, their lowest annual level since 2004. Industry profitability will steadily improve beginning in 2012, but costs and competitive pressures are expected to keep margins tight over the next four years.
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