Prices of new homes in Calgary have posted the largest year-over-year increase among any city in Canada, according to new numbers from Statistics Canada. At the same time, prices in Edmonton have fallen flat.

The latest information, released this morning, suggests the index of new homes in Calgary reached 107.8 (with the index of prices in 2007 set equal to 100). That’s 7.5 per cent higher than March of 2013.

At the same time, Alberta’s capital city reported a small decrease. Edmonton's index in March stood at 90.9—about 0.1 per cent lower than a year ago. Over the last four years, new home prices have been essentially unchanged at close to an index of 90 (see chart). That means prices are nearly 10 per cent lower than they were in 2007.

The contrast between prices in the major cities is puzzling. Both cities continue to fare well economically. Edmonton actually holds a slight advantage in the labour market: its unemployment rate in March was 4.8 per cent, slightly lower than Calgary’s 5.0 per cent rate (three-month moving averages).

Some of the difference could be explained by the ongoing recovery from last year’s floods, which is still having an impact on material prices and building costs. With respect to Calgary’s hot market, Statistics Canada says: “Builders reported that higher material and labour costs, market conditions and the cost of developed land were the primary reasons for the increase.”

The value of building permits issued by cities and municipalities across Alberta rose slightly in March to $1.312 billion, according to new numbers from Statistics Canada. That increase over February is due entirely to a rise in the value of non-residential projects.

The issuance of building permits is akin to a sign in the tea leaves for economists. Builders and developers take out permits on projects they’d like to start in the coming months. That strongly suggests future spending on construction materials and stimulates the labour market for skilled trades.

Over the last twelve months, the value of anticipated construction spending in Alberta has increased by 9.9 per cent over the previous period, reflecting strong demand by both home builders and large project developers. Nationally, the statistics show movement in the opposite direction. 

“Contractors took out $6.0 billion worth of building permits in March, down 3.0 per cent from February,” says the Statistics Canada release. "The March decline followed an 11.3 per cent decrease the previous month.”

Alberta’s jump in non-residential permits in March was led by commercial projects in both Edmonton (+$48 million) and Calgary (+$27 million). There was also a gain of $57 million in institutional and government projects in Edmonton. Residential building permits were unchanged, but some of that may be a rebound from the dramatic surge in housing permits in January and late last year.