Metro Vancouver home builders ease off discounts in hot market

New-home prices rose by 1.4 per cent in September, the greatest jump seen by Statistics Canada

By Derrick Penner, Vancouver Sun; with Canwest News ServiceNovember 13, 2009


The rebound in Metro Vancouver’s resale real estate markets allowed new-home builders to take back a little bit more of the discounts they had to give buyers earlier in the year to make sales, recent figures from Statistics Canada show.

New-home prices edged up 1.4 per cent in September from August, according to Statistics Canada’s new housing price index, but are still some 6.4-per-cent lower than prices a year ago.

“What I tell people is that we were probably reducing prices 15 to 20 per cent across the board,” Neil Chrystal, president of Polygon Homes Ltd. and president of the Urban Development Institute Pacific.

“So obviously, at six per cent [down, the discounting] is a lot less.”

The 1.4-per-cent increase from August to September is the biggest mont-to-month jump among the urban markets that Statistics Canada surveys.

In its report, Statistics Canada said new-home prices rose in Vancouver as builders moved into new phases of development.

Chrystal added that heavy sales activity over the summer, propelled by buyers locking into rock-bottom mortgage rates, allowed developers to “charge a little bit more.”

He estimated that for a lot of cases, where builders had to discount prices earlier in the year on homes that were already built, they would have been unable to recoup their construction costs.

Now, however, as builders have been able to work in lower construction costs, Chrystal said many builders have gone from “losing money to probably making a little bit.”

“It’s still very hard to push your prices up too far,” Chrystal added, “[and] I think certainly there are areas that aren’t doing as well as others.”

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said there is an element of “recouping” the discounts builders had to make earlier in the year to maintain sales, but some of their own costs are also rising again.

Simpson said some prices for materials are on their way up again, development cost charges levied by municipalities are also rising, and land prices — which had dropped considerably during the months of the downturn — are recovering their values as well.

Even tradespeople who are “still working for less than they were at the peak,” are starting to see opportunities to raise their rates, though stiff competition for jobs is helping to keep their rates down.

Across Canada, the new housing price index rose 0.5 per cent during the month — the biggest monthly increase since January 2008 — following a 0.1 per cent gain in August, and more than economists expected.

After Vancouver’s increase, Ottawa-Gatineau showed the next biggest rise at one per cent. Calgary was 0.6 per cent higher, and Toronto, Oshawa, Ont., and Saskatoon were all up 0.5 per cent.

The biggest declines were in Windsor, Ont., down 0.7 per cent, Sudbury, Ont., and Thunder Bay, Ont., both down 0.5 per cent, Victoria, off 0.2 per cent, and Edmonton, where prices were 0.1 per cent lower.

On an annual basis, the housing price index was 2.7 per cent lower in September, down from 3.1 per cent the previous month.