September 26, 2020

Housing prices to increase in 2012

Average hike of $7,000 predicted
By Marty Hope, Calgary Herald December 31, 2011

Builders have been consistent in their message to consumers: If you’ve been waiting for house prices to come down, you’re waiting in vain.

As the industry gets set for the first business day of 2012 on Tuesday, the message is that prices will be going up.

For 2011, builders and their tradespeople and suppliers worked out agreements to ensure some semblance of normalcy during what can only be termed an erratic, frustrating year.

“Throughout 2011, upward pressure on new home prices has been relatively low,” says senior analyst Richard Cho of Canada Mortgage and Housing Corp. “With the unemployment rate elevated and new construction activity moderating, this has taken some pressure off some construction costs.”

For 2012, we’re not talking here about any dramatic increase in new home prices – but there will be movement.

Another reason builders won’t go nuts with hikes is because they are still facing competition from the well-stocked resale market.

“As economic conditions improve and demand for new homes rises, prices will experience a lift in 2012,” says Cho.

It’s expected that when the ledgers for 2011 are closed at CMHC, the average price will likely sit at about $541,000.

For 2012, consumers can look forward to an average $7,000 increase, or about 1.3 per cent higher year over year.

CMHC uses Statistics Canada’s New House Price Index to measure any changes in the price of new homes.

During 2011, increases in the index were mainly supported by land prices because the cost of labour and materials had come down.

“After the first seven months of 2011, the land component of the index was up 2.7 per cent year over year, while the house component was down 1.6 per cent,” says Cho in his most recent Housing Market Outlook document.

There has also been a change in the mix of housing that has pushed up the average absorbed price.,he says – a trend he saw had developed by the end of August.

The proportion of homes priced at $650,000 and above increased from 13.3 per cent in 2010 to almost 20 per cent this year.

Conversely, homes priced at $449,999 and under decreased to 47 per cent, down from 59 per cent, over the same period.

In terms of prices and competition from the resale market, the expanded number of available homes being sold through the Calgary Real Estate Board has held prices back here as well.

From Jan. 1 to the end of November, the average price of detached single-family resale homes on the MLS system was $467,140, up one per cent from a year ago.

Meanwhile, resale condos actually lost ground, dipping to $287,545 from $290,353 in 2010.

As the supply in the resale market begins to lessen and conditions become even more balanced, stronger price growth is expected in 2012, says Cho.

I hope everyone had a very merry Christmas – and I also hope 2012 will be successful.

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