Wednesday, February 12 New home prices surge By TERRY WEBER Globe and Mail Update New home prices posted their biggest annual increase in more than a decade in December, capping a strong year for this country's housing market, Statistics Canada said Wednesday. In December, new home costs were 5.1-per-cent higher than they were in the same month a year earlier. That's the biggest annual increase in 12 years, the government agency said. "This reflects the strength in the market for new homes, also evidenced by the record year for the issue of building permits by municipalities," the agency said. On a monthly basis, costs were 0.3-per-cent higher than in November, with higher material and labour costs prompting the month-over-month increase. "As a closely watched, secondary indicator of inflation, the Bank of Canada may be somewhat concerned about the pricing pressures building into Canada's housing market," Royal Bank economist Carl Gomez said. "In recent months, a tight labour market and higher material costs have driven new home prices higher, while extremely tight market conditions have been the chief culprit behind the sharp rise in house prices in the resale market." Monthly increases in both the new home and resale markets, he noted, have slowed as a result of more balanced conditions, although the sharp annual increase still raises concerns about price pressures spilling over into the broader economy. "So notwithstanding the geopolitical uncertainty surrounding the Canadian economy, we continue to expect the Bank to begin a series of measure rate hikes by April, in an effort to bring inflation back to within its targeted range," Mr. Gomez said. Monthly increases were seen in 12 of 21 major urban centres, led by a 0.9-per-cent spike in the St. Catharines-Niagara region. Calgary followed, with new home prices rising 0.8 per cent in December compared with November's levels. Increases were also seen in Hamilton, London, Edmonton, St. John's, Toronto as well as in the Sudbury-Thunder Bay, Ottawa-Gatineau, Saint John-Moncton-Fredericton and Kitchener-Waterloo regions. Nine centres posted no increase. There were no monthly decreases in new home costs. Year-over-year, Edmonton led the way in terms of annual price increases, with costs climbing 9.3 per cent. Montreal ranked second, with prices rising 8.3 per cent. One of the year's most notable turnarounds, Statscan said, was seen in Victoria and Vancouver, where home prices rose 3.6 per cent and 2.5 per cent respectively following a period of declines in the late 1990s.