The Bolt

I've been told, and I've read, that the cause of our recent increase in housing prices is due to lack of serviced lots. That is, people want to build more houses here, but there aren't enough new lots being opened for development. It turns out that CHMC doesn't know what it's talking about when it makes forecasts (or, perhaps, doesn't have sufficient information to make accurate forecasts). Contrast what it said in 2006:

Total housing starts are expected to increase 4.7 per cent to 3,600 units in 2006 and remain unchanged in 2007.

To what it is now reporting:

Saskatoon total monthly housing starts were up 60.7 per cent as homebuilders started construction on 90 homes in February compared to 56 units in February 2006 [...] the highest recorded in that month since 1978,.

Regardless of the bad forecasting, there has to be a reason for the disproportionate spike in prices. So here's my guess as to the REAL explanation over housing prices: it has become a speculative market economy. People are buying houses for the sole purpose of reselling them. Yes, this has always happened a bit in the past, but it's like gold fever or stock market rushes... once a few people make some money here (more than usual), this starts a snowball effect with more people looking to purchase a house and flip it for profit. More people buying means more demand and higher prices. Higher prices lure more and more "investors" (speculators), and the cycle continues. Don't get me wrong, there is a real increase in demand for housing here. It's just been blown way out of proportion by "false" demand from speculators.

How long will this last? That is indeed the entire point of my message today. It won't. People are looking at the rush on Saskatoon housing and comparing it to the housing market in Calgary (which has been on the rise for 6-8 years) and that of Vancouver (which rose over a decade ago and never has dropped back off) and thinking that Saskatoon will do the same.

I don't think it will. I don't think that Saskatoon can sustain the same long-term price growth and/or plateau that Calgary and Vancouver have been enjoying because the economies of cities with 1 million (Calgary) or 2 million (Vancouver) people are much different than the economy of a city with 200,000 people. Calgary and Vancouver are host to a wide variety of markets that don't even exist here. They are also both rich in large multi-national companies, whereas the largest employer in Saskatoon is not a company at all but the University of Saskatchewan.