New house prices higher than expected in September in some markets

OTTAWA — Prices for new houses rose more than expected in September, led by gains in Montreal and Calgary, Statistics Canada reported Tuesday.

The federal agency's New Housing Price Index gained 0.2 per cent during the month, following 0.1 per cent increase in August.

Most economists had expected house prices to rise 0.1 per cent in September.

Prices in Montreal were up 1.6 per cent, while Calgary saw a 0.3 per cent gain.

"The monthly increases in these two metropolitan areas were due in part to builders moving to new areas with higher land development fees," the agency said.

Prices were unchanged in eight of 21 metropolitan areas in September, it said. "In Vancouver and Hamilton, a number of builders reported lower negotiated selling prices in September, while in Victoria, some builders offered discounts to spur sales."

Year over year, new home prices rose 2.7 per cent in September, down from a 2.9 per cent annual increase in August.

The biggest contributors to the year-over-year gain were Toronto and Oshawa, Montreal and Vancouver.

Last week, the Canadian Real Estate Association said reported home sales appear to be stabilizing but activity this year and next is still expected to be weak

The Ottawa-based group forecast sales to reach 442,200 units in 2010, down 4.9 per cent on an annual basis. Activity will drop nine per cent to 402,500 units in 2011 due to "lacklustre economic and job growth, muted consumer confidence, and the-+ resumption of interest rate increases are expected in 2011," CREA said.

Meanwhile, CREA said the average home price is forecast to rise 3.1 per cent in 2010 to $330,200, with increases expected in all provinces. In 2011, however, the average price is expected to fall 1.3 per cent to $326,000.

On Monday, Canada Mortgage and Housing Corp. said the annualized rate of housing starts fell 9.2 per cent in October to 167,900 units. That number was revised down from the previously reported 186,400.

"We continue to expect to see slowing in the Canadian housing market over the next six months, at least," David Rosenberg, chief economist at Gluskin Sheff, said in a report Tuesday.