Canada housing prices dip; builder profits to fall

Wed Mar 11, 2009 11:37am EDT
 
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TORONTO (Reuters) - The price of new homes in Canada dropped by 0.6 percent in January from December, producing the first year-over-year decline in more than a decade, Statistics Canada said on Wednesday.

Analysts had, on average, expected new housing prices to fall by 0.2 percent from December.

It was the fourth consecutive month-on-month drop and the largest since the 2.0 percent plunge recorded in February 1991. The year-on-year decrease of 0.8 percent was the first since the 0.6 percent decline recorded in January 1997.

"On balance, this is a weak report and highlights the continued pace of moderation currently afflicting the Canadian housing market," said Ian Pollick, economics strategist at TD Securities.

"We expect prices to continue to cool as the broader economy continues to slow. However, the price moderation taking place in Canada is still much slower and to a shallower depth than the correction taking place in the U.S.," Pollick said.

Although prices rose in nine of the 21 metropolitan areas surveyed, and were unchanged in another seven, the January index was dragged down by some big drops in western cities that had seen large price increases in recent years.

In Alberta, Edmonton recorded a 2.8 percent drop in January from December, while Calgary posted a 2.1 percent decrease. In British Columbia, Victoria and Vancouver saw prices fall by 1.1 and 0.7 percent respectively.

In a separate report on Wednesday, the Conference Board of Canada said declining housing starts will cut home builders' profits by almost 20 percent this year.

Residential construction profits will drop to C$3.2 billion ($2.5 billion) from $3.9 billion in 2008, and extend the decline to below C$3 billion in 2010, the board forecast.

Earlier this week, data showed Canadian housing starts fell in February, marking their sixth monthly decline.

(Reporting by Ka Yan Ng in Toronto and David Ljunggren in Ottawa; editing by Rob Wilson)

 
<p>A construction worker frames a house at a new home development in Ottawa July 9, 2008. REUTERS/Chris Wattie</p>