Saskatchewan Housing Needs Some Good News
The residential housing market in Saskatchewan has been hit harder than any other in the country.
By John Bleasby
A sharp drop in housing starts, an oil-based economy in decline, a drop in resale house prices; it doesn’t bode well for the Saskatchewan housing industry. According to the CMHC, overall housing starts fell 59 per cent across the province on a year-over-year basis in April, with single detached housing down 35 per cent from a year earlier.
CMHC regional economist Lai Sing Louie says “Inventory levels are rising, so that’s a signal for builders to … back off a little bit in terms of new construction.” Louie predicts that housing demand will moderate as oil and gas industry and companies downsize demand for labour and services.
City by City Numbers Vary
While the CMHC reports a whopping 79 per cent drop in April’s year-over-year permit applications in Saskatoon, Dave Hepburn, CEO of the Saskatoon Home Builders’ Association while acknowledging a slow start to the year, cautions that too much can be read into 2014-2015 comparisons. Hepburn told Canadian Contractor in an interview “Our year-to-date numbers are almost equal to 2013. We’re seeing a decline from last year in single family homes, but that’s because 2014 was a very big year. Inventories are a bit high, some bigger builders are dropping prices, but we’re not crying ‘woe is me’. Our market is fairly solid. Multi-family building is in fact very consistent year-to-year.”
Regina Home Builders’ Association CEO Stu Niebergall concurs. He pointed out to Canadian Contractor that provincial unemployment rates remain amongst the lowest in the country while wage growth is 2nd highest. Looking at housing over more than an immediate year-to-year basis reveals numbers that remain above long term averages. “Regina’s economy in particular is less reliant on the oil industry than others. In fact the provincial economy is quite diversified.”
Meanwhile, new home listings have hit a 20-year high, Gord Archibald, CEO of the Association of Regina Realtors told the Globe & Mail. Average house prices in that city are about 10 % below peak levels and 3% lower than last June.
Is a Prime Rate Cut the Needed Lifeline?
What about the recent interest rate cut? Canadians spent more money in 2014 fixing up their existing homes than buying new homes, $68 billion on renovations versus $48 billion on new homes, according to a widely published Altus Group report. The housing industry consultants expect home renovations to grow by 3% this year and another 3% in 2016, thanks in part to lower borrowing costs.
This might bring some relief for the hard-hit Saskatchewan building trades, at least for those with the flexibility to move away from new home construction and towards renovation. In conversation with Canadian Contractor, Sarah Wheelwright, founder of TrustedSaskatoon.com, a business referral website, calls it a ‘buyer’s market’ for renovations. “Homeowners are taking more time, looking at reviews, conducting their research, and booking the companies who are going to do the work right.” Dave Hepburn concurs. “Land costs have run high in recent years, so a number of homeowners are considering renovations instead of buying new.”
New Loan Caution Prevails
Contractors will have to convince potential customers that home improvements will increase their equity value, and to take on higher debt in an unsettled economy, even at reduced interest rates. A CIBC study released recently suggests that 60% of respondents claim lower rates would have no impact on them; while 33% say they would use lower rates as an opportunity to accelerate debt repayment.