By Paul Vieira
OTTAWA--Canadian new-house prices slowed in December, marking the smallest month-over-month gain in 18 months.
Nevertheless, the price of new homes in Canada rose in 2021 at its fastest pace in over 30 years, reflecting a red-hot real-estate market underpinned by strong demand and record-low housing inventory.
Statistics Canada said Friday its new-house price index climbed 0.2% in December. From a year ago, the index climbed 11.6%.
The data agency said for 2021, new home prices across the country climbed 10.3%.
"As the housing market continued to overheat through 2021, housing supply continued to shrink throughout the year in most [markets] surveyed," the data agency said.
Data this week from the Canadian Real Estate Association indicates that prices for existing homes rose by a record 26.6% in December, and housing inventory--or the number of units available for purchase--was at a historical low of 1.6 months. This means that at the current pace of real-estate transactions, all listings across the country would be acquired in over a month and a half.
Canada's inflation report for December said shelter costs advanced by the most in about 14 years.
Rising housing prices, along with inflation data and evidence of strong upward wage pressure among businesses, has persuaded some economists that the Bank of Canada will raise its main interest rate next week.
December's new-house price report also includes a forecast for 2022. Statistics Canada says the potential for rate increases from the Bank of Canada won't likely slow down price advances for new houses. The report noted mortgage rates remain at historically low levels and Canadian households have amassed an estimated 300 billion Canadian dollars, or the equivalent of $240 billion, in savings during the pandemic.
"The shortage of housing supply will continue to be felt in the housing market as it will take time for the builders to bounce back to a pace that will allow a balanced supply and demand. This will continue to put upward pressure on prices until inventory can be replenished," the data agency said.
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(END) Dow Jones Newswires