The weak conditions in the labor market - dragging demand for new homes and input prices for building - and commodity prices (inputs) is driving down the value of new homes in Canada. From The Daily:
"Contractors selling prices decreased 0.5% in March compared with a 0.7% decline in February. This resulted in a New Housing Price Index of 154.6 (1997=100).
Between February and March, prices declined by 1.2% in Calgary and Edmonton, followed by Vancouver (-1.1%) and Victoria (-0.9%). In Calgary and Edmonton, declines were attributed to lower material and labour costs and lower lot prices from developers. In Vancouver and Victoria, builders reported lower prices due to competition and slow market conditions".
"On the West Coast, Vancouver (-7.8%) and Victoria (-6.6%) each posted year-over-year declines".
Read the full report here...
The softer home construction market had resulted in home builders benefitting with a 12% to 15% reduction on their labour costs for construction.
Will new home prices in Canada follows the US?
"Millan Mulraine, economists strategist at TD Securities, said ``the continued drop in new home prices is a reflection of the overall weakness in the Canadian housing market, and the weak domestic economic conditions and soft labour market conditions continue to sap housing demand.''
On Friday, Canada Mortgage and Housing Corporation said the number of housing starts fell to 117,400 in April from 146,500 the previous month".
The fundamentals may defer between Canada and the US housing markets. However, real estate cycle follows the health of the economy. When market sentiment is weak, home prices would not find the support required to stop the price decline. Recent new home starts data by CMHC's Spring Report confirmed significant pull back in home builders activities for 2009 and 2010.
As posted previously the million dollar new-home market in Richmond is undergoing a price re-adjustment as a result of lower building lot cost and labour costs for construction.
You can view million dollar homes for sale by following this link.
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