Saskatoon house prices slip, overbuilding continues as new condos and townhouses sit empty
Saskatoon is still a buyer's market but 'it's best to be patient,' says real estate analyst
Prospective home sellers in Saskatoon may be doing the city a favour by lowering their asking prices.
"We saw an improvement in the overall assessment for Saskatoon," said Goodson Mwale, a senior market analyst with the Canada Mortgage and Housing Corporation.
The agency's last housing market assessment showed overvaluation was at a "moderate" level for Saskatoon. In a CMHC report released Tuesday, Saskatoon's evidence of overvaluation is now rated as "low."
"When it comes to Saskatoon and Regina, both markets are experiencing buyer's market conditions," said Mwale.
"House prices are beginning to come more in line with the economic and demographic fundamentals."
While it may be a buyer's market, this may actually not be the best time to buy a home, according to Josh Buchanan, a Saskatoon real estate analyst and blogger.
"Buying now means you are buying an asset with a depreciating market value, which means it's not a good time to buy, especially for those people who aren't certain that they'll be staying put long-term," Buchanan said, adding increasing interest rates and changing government regulations negatively impact the market.
"I believe it's best to be patient and wait for the market to return to balance, and for the dust to settle from the changing policies before buying — especially for first-time buyers."
Apartment vacancy rate still high
Saskatoon's year-over-year vacancy rate has slipped slightly, from 10.3 per cent in 2016 to 9.6 per cent last year.
Tuesday's report showed evidence that overbuilding remains high, with numerous new condos and townhouses sitting on the market unsold following their completion.
"With the economic downturn that we saw not too long ago, the builders were responding to economic conditions and were pulling back on the number of units that they were putting out," said Mwale.
"Supply relative to demand is quite elevated."
Buchanan said developers were slow to respond to overbuilding in the market and new construction continued, despite demand being satisfied. Condos and townhouses have a longer building period compared with single-detached homes, which is why it is harder to control their supply.
"The quickest and easiest way to sell off this excess supply is just to cut prices significantly to attract more buyers, just like we would see in any other type of market. Unfortunately, sellers are not eager to cut prices, which is preventing the excess supply from being sold off and the market from returning to balance," he said.
CMHC said between the summers of 2016 and 2017, Saskatoon saw a 4.7 per cent increase in the number of adults between the ages of 25 and 34 moving to Saskatoon.
Stricter borrowing rules for potential buyers have also caused sellers to lower asking prices.
The report noted Saskatoon's economy is recovering, as it added a total of 2,300 jobs during the first nine months of 2017, all full-time positions.