New housing prices in Calgary were up 0.2% between June & July according to the latest New Housing Price Index released by Statistics Canada this morning. On a year-over-year basis, Calgary prices increased a nation-leading 6.9%.
Statistics Canada reports that among the 21 census metropolitan areas surveyed, 6 posted 12-month price declines in July: Vancouver (-1.8%), Charlottetown (-1.6%), Ottawa–Gatineau (-1.3%), Victoria (-0.9%), Halifax (-0.3%) and Edmonton (-0.1%).
With Alberta’s economy on solid footing, it’s interesting to note how new home prices in the two largest cities in the province are performing so differently.
“Edmonton, however, continued to show no increase [on a month-over-month basis],” writes Todd Hirsch, chief economist with ATB. “Its index was unchanged at 91.1. The index sets prices in 2007 equal to 100. That means new residential prices in Calgary are higher by nearly ten per cent compared to seven years ago, while Edmonton new home buyers are seeing prices about nine per cent lower.”
Mr. Hirsch explains that the diverging price trends are “odd given that new data show Edmonton’s population growth is outpacing Calgary’s. More people moving into the capital region should, in theory, boost housing demand and drive prices higher.”
So why have Calgary new home prices been steadily rising over the past several years while Edmonton prices are still about 9% lower than they were in 2007?
“The gap between the two cities can be attributed to higher land and building costs in Calgary,” writes Mr. Hirsch. “Land for residential development in and around Calgary has been somewhat restricted. This has limited the supply for home builders and boosted price.” (Source)
This is evidenced by the chart below. In the past few years, the cost of a house has increased “due to higher material and labour costs as well as good market conditions.” Land costs have, for the most part, remained elevated and are trending higher.