Housing starts decline in Saskatchewan

Housing starts have fallen dramatically in Saskatoon and Regina, as builders deal with a glut of house listings on the market.

Saskatoon region starts dropped 85 per cent in the first quarter of 2009 from the same quarter of last year, Canada Mortgage and Housing Corp. reported Wednesday. However, 2008 was one of the strongest years in Saskatoon history for housing starts.

The decreases were expected, said Paul Caton, CMHC market analyst in Saskatchewan.

"We certainly forecast lower starts for 2009. However, we do expect an uplift in 2010."

Lower starts are due to built-up inventory, as well as competition from a high number of existing housing units on the market.

"When we have wide choice available on the resale side, that means there's opportunity for buyers there and they will tend to look at the lower-priced market of existing housing," said Caton.

When resale prices were escalating rapidly through 2007 and 2008, and there were few resale listings, more people considered new housing, said Caton.

"The situation has reversed, in both markets. There's an abundance of supply in both markets, giving consumers an opportunity to consider both.

"The resale market is traditionally a lower-priced market on a per-square-foot basis."

CMHC is predicting a decline in housing starts for all of 2009 compared to 2008. However, the forecast is still on par with pre-2007 numbers.

CMHC is presently finalizing an updated forecast.

Caton said the Saskatchewan housing market has substantially changed during the last two years.

"We're looking at a whole new market now, after 2007-08. In Saskatchewan, there's still a lot of confidence there. The consumer sees mortgage loan money is available in this province. There's a lot of motivation for the consumer to go out there and look for home ownership."

Caton also said in-migration will remain positive, although not as strong as it was in 2008.

Saskatoon builders have started 77 single-detached homes so far this year, down 73 per cent from 284 last year.

In March, single starts fell 75 per cent to 32 units -- down from 128 units in the same month of 2008. However, CMHC noted, last March was among the strongest months on record for new housing starts.

In March as in February, no new multiple units were started. Last year, 86 units were started in those two months. So far this year, only 12 multiple units have been started, down 96 per cent from 2008 and the lowest number since 1991. In 2008, 306 units were started in the first quarter.

Regina builders broke ground on 42 single-detached homes in March, down 40 per cent from last March, and five multiple units, down from 57 units.

Year-to-date, Regina single starts have fallen 41 per cent to 117 units, and multiple units are down 90 per cent to seven units.

Saskatchewan starts were down to 257 units from 948 units last year for the quarter, a drop of 73 per cent. That's the lowest number of first-quarter starts since 2001.

However, prices are staying "quite strong," said Caton. "We will see only modest declines this year and potentially increases in some Saskatchewan markets."

The Saskatchewan branch of the Canadian Home Builders' Association said there were still 3,000 homes under construction in Regina and Saskatoon, leading builders to take into consideration their inventories while making business plans.

The association also said severe winter weather was a contributing factor to decreased housing starts.

- Joanne Paulson - Saskatoon Star Phoenix