Saskatchewan the Hottest Regional Housing Market In Canada through June

Alex Carrick -- August 15, 2007

“Last Hurrah” for Housing Starts and Home Price Increases
With a 76% increase in housing starts year to date through June 2007, compared with the same period in 2006, Saskatchewan’s homebuilding market is currently leading all provinces in Canada. Saskatchewan’s economy is booming thanks to resource-sector growth. The province is even experiencing an increase in population for the first time since 1999, with a net gain in interprovincial migration between itself and neighbouring Alberta.

Manitoba (+24%) is the only other province with a significant increase in housing starts year to date. Québec (+5%) is in third place with only a modest increase, but compared to most other provinces, this has to be considered good news. Ontario (-16%) is way back in the pack, with only Prince Edward Island turning in a worse performance so far this year.

However, Thunder Bay is being transformed (largely by the Ontario government) into a “knowledge” centre in northern Ontario. Initiatives undertaken to achieve this have included the new medical-doctor training school established at Lakehead University and the new MMRC (molecular medicine research centre) associated with the Thunder Bay Regional Hospital.

Last Year’s Hot Markets Drop in the Ranking This Year
Some of last year’s hot homebuilding markets, particularly in Alberta, are further back in the pack this year. Edmonton has recorded a small increase in starts (+3%), but Calgary (-24%) has fallen back sharply. As for the three largest cities in the country, according to population, Montréal (+6%) is the only one to register an increase, while both Vancouver (-6%) and Toronto (-20%) have dropped unit-starts.

New House Price Increases are Moderating
There is often a tie-in between starts and new home prices. Through June, Statistics Canada records that the highest year-over-year increases in new home prices have been recorded in Saskatoon (+38.6%) and Regina (+21.6%). The big year-over-year jumps in home prices in Edmonton (+37.0%) and Calgary (+22.0%) are after-effects of residential real estate strength last year. In fact, the latest figures for these cities are considerable slowdowns from earlier this year.

Vancouver (+8.8%) and Winnipeg (+6.5%) are the next tier of home price increases in the West. It is well to remember that Vancouver and Victoria started this year with an average level of actual home prices about 50% higher than anywhere else in Canada. In the East, the largest year-over-year price increases have been recorded in Halifax (+7.1%) and Hamilton (+6.1%). This has spurred on an increase in starts in Hamilton (+11%), but has so far left Halifax (-8%) in the same doldrums it has been stranded in throughout this latest period of heightened residential activity elsewhere.

Windsor, with layoffs in the auto sector, is the only city with a decline in house prices (-1%) year over year and it has also recorded the greatest drop in starts (-59%) among all of Canada’s cities.

Implications for Construction
Based on the fact that the current regional strength in housing starts is mainly centred in small-population markets, one gets the impression that residential construction in Canada is currently celebrating its last “hurrahs” in this cycle. Furthermore, house price increases are moderating almost everywhere. This signals lower expectations about asset growth, which is another factor that will cool new housing demand. CanaData is forecasting a relatively good year for starts this year (213,000 units, down from 227,000 last year), but then a further cooling next year (195,000 units), to below 200,000 units for the first time since 2001.