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New houses keep getting pricier
ROMA LUCIW
Tuesday, September 12, 2006
Builders in St. John's are getting a tiny taste of Calgary's housing medicine.
On a national basis, the price tag for a new residential home rose 1.1 per cent in July from June, Statistics Canada said yesterday. Compared to a year ago, contractors' selling prices have jumped 10.8 per cent - the fastest pace since October 1989.
As has been the case for the last six months, Calgary led the price gains with a rise of 4.6 per cent. However, St. John's displaced Edmonton as the city with the second-largest gains. Prices in St. John's rose 2.9 per cent - their largest monthly jump since July, 2001, while in Edmonton they increased a slimmer 1.9 per cent.
Given that Alberta's two largest cities are drowning in oil riches, it is not surprising that new home prices there have paved the way higher in the last three months. But prices in St. John's have held steady or fallen in recent months, making July's gains notable.
Randy Sterns at Statscan said nearly all of the builders in St. John's cited rising labour rates for the higher July prices. Two-thirds said the cost of construction materials has risen while one-third said higher prices for land were contributing factors.
Although Statscan does not track why labour rates rose, Mr. Sterns said one possible explanation is the discrepancy between what builders are paying in Newfoundland and in Alberta. That gap might be forcing builders on the East Coast to "increase their labour rates to keep their skilled labour," Mr. Sterns said. "We keep hearing stories of people moving out West to take advantage of the high rates."
Craig Foley, owner of Gibraltar Homes in St. John's, pays his workers above the local average in order to ensure he is not scurrying to hire new ones.
"My guys are happy and don't want to migrate but everyone else is finding that when it comes to plumbers and electricians, they can't find anyone," he said. "Everyone seems to be going to Alberta, to Fort McMurray."
Mr. Foley's company built 62 residential homes last year, priced at between 0,000 and 0,000.
In his view, the skyrocketing cost of raw materials is having the biggest impact. Copper and wood prices have "gone through the roof," Mr. Foley said, and those costs are being absorbed by the builder and passed on to the buyer.
"The last few years have been exceptional in Newfoundland, what with the oil boom and people coming home. We couldn't build houses fast enough," he said. "Now, there is a lot of excess inventory and if you look in the home buyers home, you are seeing a lot of prices getting reduced."
Gary Reardon, president of Reardon Construction & Development Ltd., questions whether Statcan's methodology and samplings are representative of the housing picture in St. John's.
"On balance, I don't think prices have gone up dramatically," he said. "I think our market has softened in recent months."
Mr. Reardon said that while there has been a departure of skilled workers to places like Fort McMurray, good solid companies with workers can still be found in the St. John's area.
The migration of people to Calgary and Edmonton has led to a surge in demand and prolonged construction times in those cities, Statscan said.
Land prices rose in 15 of the 17 metropolitan areas where new home prices increased in July.
On a longer-term basis, Statscan said Calgary posted the largest twelve-month price increase for new homes. Edmonton was next, followed by Winnipeg, Saskatoon and Regina.
A series of weak U.S. housing reports have led to mounting speculation that the housing market south of the border is in the midst of slowdown. The housing market in Canada has only started to show signs of slowing, and is still on track to close the year with record growth levels.
© The Globe and Mail |
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