Price of new homes up 1.2%

WATERLOO REGION -- New houses are a hot commodity in Waterloo Region which had the biggest monthly surge in new house prices for the entire nation, according to Statistics Canada.

The contractors' selling prices for newly built houses in this region rose 1.2 per cent in June, outpacing the monthly price increases in 21 urban centres across Canada.

Regina was in second place, with a 0.9 percent increase between May and June in the price of newly built houses. Hamilton, Edmonton and Victoria all reported increases of 0.7 per cent.

"The low interest rates and good employment are driving most of the housing price increases," said Ann Williamson, a spokeswoman in the prices division at Statistics Canada.

The new house price index is based on a survey of contractors who send in the prices for a range of new houses and are asked to cite reasons for price increases, Williamson said.

In this area, contractors said prices went up because of increased material costs, she said.

But increases in materials and labour are also market-driven, Williamson added.

"There is so much building going on right now that there is competition for labour," she said.

The Canada Mortgage and Housing Corp. says builders started 501 housing units in this census metropolitan area in June. That includes 326 single-detached homes.

Foundations were poured for 1,521 single-detached homes in the first half of this year, compared to 978 in the same period last year.

Jim Koppang, a market analyst with the Canada Mortgage and Housing Corp., said from April to June this year, the average sale price of a newly-built single detached family home was $228,640 in Kitchener, $216,145 in Waterloo and $198,770 in Cambridge.

Two storey single detached houses are the dwelling of choice for new home buyers in the region, according to the corporation's data.

"After the events of last Sept. 11, mortgage rates have really dropped and that had a major impact on lowering the carrying costs of the mortgage," Koppang said.

"So all in all, people are expecting that this is the best time to make the move," he added.

Tim Ingold of the Waterloo Region Homebuilders' Association and a manager of Coldwell Banker's new homes division said builders have been extremely busy.

"There certainly hasn't been any summer slow-down," Ingold said. Low interest rates are the major factor, but also, the resale of existing homes is fairly tight, he points out.

People wanting a particular type of home may try to get that home in the resale market, only to lose it in bidding wars. Meanwhile, the home builders have an inventory of new homes and people can choose from that inventory to get what they want.

But new house prices are also going up because of labour costs, Ingold added.

"There are probably some material price increases, but more specifically, it's hard to get trades labour. Builders are having to pay more to get them on their site."

An interesting trend in Waterloo region is the increase in the number of buyers for large homes priced at the higher end of the market.

Janet Schnarr, president of the Kitchener-Waterloo Real Estate Board said in the month of July, 10 homes priced at more than $400,000 were sold, which is a 66.7 per cent increase compared to the same time last year.

"It's not just out of town purchasers -- there are a lot of local people purchasing houses in that price range too," she said.

Ingold has also noticed the steady trend toward the purchase of higher-end homes and he attributes that to the low interest rates -- people who want to move up into their dream home figure this is their chance to afford it.

"Maybe there is more money out there, but again, it could be that the move up-market is happening because it's more affordable now," he said.

rsimone@therecord.com