The price of a new home in Victoria posted the largest 12-month increase of any city in Canada as the national housing market continues to experience robust demand from home buyers, Statistics Canada reported Tuesday.

StatsCan said the price of a new Victoria home in August rose by 9.1 per cent over August 2003, according to its new housing price index which measures the change in contractors’ selling prices.

Ottawa-Gatineau had the second-largest annual new house price increase, at 8.6 per cent, while Winnipeg came in third at 8.5 per cent. Vancouver was 11th among 21 Canadian cities surveyed, with new house prices in the city rising by 5.5 per cent in the past year.

New-home prices in August were running six per cent above their year-earlier levels and roughly three times the rate of inflation, a reflection of a housing market that remains hot but a market which analysts say will cool.

“An active housing market, along with higher prices for building materials and labour, continued to push prices up across the country,” Statistics Canada said Tuesday. “The annual increases for July and August were down only slightly from the 6.2 per cent annual increase in June, which was the biggest 12-month gain since February 1990.”

“New-house prices are rising more strongly than was the case in early 2003, when the Bank of Canada expressed concern about house-price pressures leading to persistent upward pressure on core inflation,” said Ted Carmichael, economist at J.P. Morgan.

“However, housing demand and prices are expected to moderate later this year as mortgage rates rise.”

A cooler housing market would be good news for inflation but not for the economy, said Allan Seychuk, economist at RBC Financial Group.

Housing prices, he noted, have garnered a bit more attention lately from the Bank of Canada, given the robust health of Canada‘s housing market alongside the bubble-like conditions in some other countries such as Australia, the United Kingdom and parts of the United States, he noted. While the bank has expressed concern about the impact of housing prices on inflation, housing has also been a major source of economic growth, he added.

“House-price trends have become somewhat more important because of how important residential construction has been as a source of growth. If prices begin to decline rapidly, homebuilders will back off on activity and growth will be somewhat lower than expected,” said Seychuk.

BUILDERS INVEST IN THE WEST:

Investments in non-residential buildings were down in 15 of 28 metropolitan areas surveyed by Statistics Canada, but advances in all three components of the sector — commercial, institutional and industrial — in Greater Vancouver helped the region post the largest increase (+9.1% ) in the third quarter.

Investment in non-residential building construction, % change, Q2 to Q3 2004, by city

St. John‘s -23.0

Halifax +11.3

Montreal -4.8

Toronto -3.5

Winnipeg -10.1

Regina -18.6

Calgary +0.6

Edmonton +4.6

Abbotsford -5.6

Vancouver +9.1

Victoria -9.9

Outside Atlantic Canada, B.C. posted the largest increase in investments in non-residential buildings (+4.2% ) in the third quarter.

Investment in non-residential building construction, % change, Q2 to Q3 2004, by province

Canada -0.9

Newfoundland and Labrador -13.9

Prince Edward Island +12.0

Nova Scotia +33.8

New Brunswick +0.5

Quebec -2.2

Ontario -2.7

Manitoba -13.5

Saskatchewan -11.9

Alberta -0.2

British Columbia +4.2

Source: Statistics Canada, Vancouver Sun

© The Vancouver Sun 2004