Construction costs and Bank of Canada rate increases were major contributors to May's movements
New home prices for Canada were up by 0.5% in May compared to April, building on a 0.3% increase in the previous month.
This was driven by gains in 14 of the 27 census metropolitan areas (CMAs) surveyed by Statistics Canada. Prices remained essentially unchanged in the other 13 markets.
Sustained increases in construction costs were a major component of the home price growth over the last few months. Even a 19.3% annual decline in lumber and other wood product prices was not enough to offset the rising costs of other products and building materials in May, StatCan reported.
The largest year over year increases were reported in energy and petroleum products (78.5%), followed by fabricated metal products and construction materials (23.2%). Price gains in cement, glass, and other non-metallic mineral products (8.7%) were also significant.
Another major driver of home price growth was the Bank of Canada’s two 0.5% overnight rate hikes in its March and April meetings.
Following these sharp increases “the resale market showed signs of cooling, as national home sales decreased by 8.6% in May compared with April. Nationally, the benchmark price for resale homes decreased 0.8% on a month-over-month basis,” StatCan said.
“Rising construction costs [continue] to push new home prices up. However, the increasing mortgage rates seem to have had a larger impact on the resale market than on the new build market, reducing demand and prices of resale properties.”