For the first time in more than six years, Canadian housing prices have remained flat, a sign the country's hot real-estate market may finally be cooling.
Home prices didn't budge between November and December, Statistics Canada said Thursday. It was the first time since June, 2000, that its monthly new housing price index was unchanged.
That easing will help keep inflation under wraps, an economist said.
“The rise in new house prices that feeds directly into the consumer price index for shelter, is expected to put less upward pressure on core services inflation in the coming months,” said Ted Carmichael, chief economist for J.P. Morgan Securities Canada.
Unlike previous months, December's monthly drop was concentrated in Alberta, where prices slid 0.9 per cent. It was the largest drop in eleven years, though prices are still up 38 per cent on an annual basis, according to National Bank Financial.
“This is a significant development since Alberta housing costs have been the source of a significant part of inflationary pressures in Canada, adding around 0.4 percentage point to the national CPI,” noted Stéfane Marion, an economist at National Bank.
The report came on the same day that Canada Mortgage and Housing Corp. repeated its prediction that housing starts will ease this year, after 2006 saw record activity in terms of both activity and price increases.
Canadian home prices remain much higher than they were a year earlier. Contractors' selling prices were 10.7 per cent higher than a year ago, with price increases in 9 of the 21 metropolitan areas surveyed. Saskatoon had the largest monthly increase, followed by Regina and London.
While housing starts are expected to slide this year, they took off with a bang in January, climbing a greater-than-expected 17.3 per cent with a surge in condo construction.
Mild weather spurred starts to a seasonally adjusted 249,300 units in January — a two-and-a-half year high -- from 212,600 in December, CMHC said in a separate report.
Starts have soared over the past year amid low mortgage rates, a strong labour market and buoyant consumer confidence. CMHC continues to expect the market will ease this year.
“The volatile multiples segment bounced back in January, accounting for most of the growth this month,” said CMHC's chief economist Bob Dugan, in release.
He expects starts to ease to 209,500 units this year, though they'll remain above the 200,000 mark for the sixth straight year.
Economists don't foresee a dramatic weakening in the market.
“Canada's strong labour market and rising incomes will continue to underpin housing demand,” said Dawn Desjardins, senior economist at Royal Bank of Canada. “We anticipate that the rapid pace of multi-unit activity will slow and that overall activity will be more moderate in 2007.”
Urban multiple starts grew at a double-digit pace, CMHC said. Urban singles starts rose overall, but eased in Quebec and British Columbia.
The Atlantic region experienced the largest percentage increase in urban starts, at 36.2 per cent, the national housing agency said.
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