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London new house prices jump 4.1 per cent in May; construction sector on record-setting pace

LONDON NEW HOUSE prices rose in May amid rising construction costs linked to some building material shortages.

New house prices in London increased 4.1 per cent in May over a month prior, Statistics Canada said in its latest New Housing Price Index report. From a year ago London new house prices advanced 12 per cent.

Looking at the broader construction picture in the city, residential projects, including single-family homes, are leading the way in new construction permits this year as London continues to set new volume benchmarks and appears it will easily break last year’s record $1.6-billion building record.

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As of April 30, city hall had issued 1,524 construction permits (all project types) in 2021, up 60 per cent over the same period in 2020. The value of those permits totalled $593 million, more than three times the value recording during the first four months of 2020.

“The numbers are monumental for the city,” Jared Zaifman, executive director of the London Home Builders’ Association, told the London Free Press. “The last year was already a record year, and I think we’re looking at 2021 to be quite another new significant record.”

The impact of the housing market locally echoes trends nationally, with new home prices in Canada jumping 1.4% in May over April, and increasing 11.3% from a year ago, the largest increase in more than 14 years.

Last week, the Canadian Real Estate Association said home-sale activity fell for a second consecutive month in May but remained at historically elevated levels. House prices for existing homes, meanwhile, rose at a record pace from a year ago.

Canada’s housing markets have surged during the past year as many people who were stuck at home due to pandemic-related business and school closures sought larger houses, often outside the country’s largest cities. Bank of Canada governor, Tiff Macklem, said this week there are early signs the housing market is now slowing, and the central bank anticipates a better balance in supply and demand over time.

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According to the Stats Can report, 19 of the 27 metropolitan areas tracked posted increases in new house prices in May. The biggest price gains were in the cities of Winnipeg and Calgary. Meanwhile, price growth was slower in Canada’s biggest housing markets, in Toronto, Vancouver and Montreal.

New home prices were up in all 27 markets surveyed on a year-over-year basis, with prices rising at their fastest pace on record in Kitchener-Cambridge-Waterloo (plus 27 per cent), Ottawa (plus 24.8 per cent) and Windsor (plus 20.6 per cent).

The data agency said builders reported that rising construction costs were helping to fuel higher new home prices across the country, with Western Canada hit especially hard by shortages of building materials such as lumber and steel.