New home prices are up in most Canadian cities, despite the devastating economic effects of COVID-19, while resource-based markets continue to struggle.
Ottawa is the country’s hottest housing market for new builds, excluding condos and apartments, according to data in Statistics Canada's New Housing Price Index. The agency says new house prices rose 5.3 per cent between February and August, due to strong demand and low supply.
The nation’s capital was already riding a wave of momentum before the virus, with a 9.5 per cent annual increase in February. Statistics Canada says the pre-pandemic strength may have been attributable to a foreign buyers tax in Toronto and Vancouver.
Jason Ralph of Royal LePage Team Realty agrees with the assessment.
“New build home sales in Ottawa are being driven by an extremely tight resale market. Many buyers are looking to buy new instead of competing in multiple offers with the potential of paying well above the asking price,” he told Yahoo Finance Canada.
“Ottawa has also seen a rise in investors looking for an alternative to Toronto and Vancouver, with the Foreign Buyer Tax still in place. To top it off, interest rates are historically low creating an incredibly strong market in the Nation’s Capital.”
Sumit Beri, works and lives in Ottawa and also thinks low interest rates will help push prices higher. He bought a new build last month as an investment.
“I didn’t want to get into bidding wars for older homes, so I thought buying a new build would give me more bang for my buck and capitalize on the appreciation of the home in a year,” he told Yahoo Finance Canada.
Beri says his decision had nothing to do with FOMO (fear of missing out). He had a price target in mind, and wouldn’t have bought if it couldn’t be met.
Ottawa takes over the top spot from Montreal, which fell to sixth place with a 2.4 per cent increase between February and August. Halifax was second, with a 3.4 per cent increase.
New house prices depend on where you look
New home prices were up in 23 of the 27 cities in the index for a 1.3 per cent increase during the six month period. They fell during the same period last year, something of an anomaly because the typically busy spring market was delayed into late summer and fall.
Rising prices during a crisis are also an anomaly. They fell 3.1 per cent year over year nationally in August 2009 during the financial crisis.
Toronto and Vancouver, the country’s two biggest markets, were up 0.9 per cent and 2.3 per cent respectively.
But as buyers looked to more affordable options, other cities close to urban centres were particularly strong, like Hamilton (+3.3 per cent), Kitchener-Cambridge-Waterloo (+3.2 per cent), Guelph (+2.9 per cent), and Kelowna (+1.3 per cent).
Three of the four cities with falling new home prices, Calgary (-1.1 per cent), Regina (-1.0 per cent) and Edmonton (-0.3 per cent), were in resource-based economies. The other was St.John’s (-0.51 per cent).
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.