Saskatchewan activity holds in anticipation of economy gains

A growing resource industry drawing an influx of international newcomers has put some confidence into the two major markets of Regina and Saskatoon. But it's a more balanced real estate market that has many investors pleased.

"We've always had good confidence, but we just had an oversupply for a while," says Gary Busch, president of the Association of Saskatchewan Realtors. "Now that we're more balanced, we're actually in certain price ranges starting to see a shortage."

Busch notes one such area is in starter homes between $200,000 and $400,000. Many are getting multiple offers and have little trouble selling in less than a week.

There's also been an improvement in condos, which had been one of the biggest gluts in the province for a while, says Busch.

"We had too many of them for the longest time," he says, noting there were a lot of conversions to rentals over the last few years. "We're just starting to get through all that inventory now."

But it's still the under $400,000 price range that's selling the most, and the inventory is getting lower and lower lately. Busch says Saskatchewan had about 1,800 listings a little more than a year ago.

"We had no other direction to go but down," he says. Now that inventory has been worked through and the market is becoming more balanced.

Once that process completes, the strength of the economy in Saskatchewan should push demand up even higher, especially if there's improvement in some of the resource industries. Those mineral and resources have always influenced the economy here. Uranium, potash and oil are three the major industries. Some of them have been expanding recently.

"If they get a strong foothold again, we'll see things take off again," says Busch. "Not necessarily that prices will go way up, but that we'd see more demand."

The Canada Mortgage and Housing Corp. is also predicting a strong year for Saskatchewan.

There's already been a strong influx of immigrants lately, feeding off some of those jobs. While last year it was common to see Ontario licence plates from those moving to Saskatchewan for jobs, this year it's been more immigrants from outside Canada, says Busch - especially from parts of Asia.

Many are going into engineering and mining, and rather than just renting, they're looking to own property.

"That's seems to be the trend I've seen in the last month or so," says Busch. "They can afford to buy houses, and they're coming to stay."

Recent numbers have also shown a shift between Regina and Saskatoon, with Regina's real estate market showing more gains. The average home price in Regina was up 16 per cent from a year earlier to reach $248,075 in January, according to the Canadian Real Estate Association. Saskatoon, meanwhile, was down 12 per cent from the year before to reach $257,977.

But Busch cautions not to read too much into those monthly numbers. For the most part, he says, both Regina and Saskatoon have performed similarly and he says they will continue to.

Investors in either city are not likely to see too much capital appreciation in 2010, as there's already been some major growth leading up to this point. But rents are also on the rise, and that's where investors can hope to make some cash flow.

Rents in Saskatoon are holding around $1,100 to $1,200 for a two-bedroom 800 to 900 sq.-ft. condo by the university, costing about $160,000 to $190,000 to purchase, says Busch. Taking the lower end of that rent and purchase price range, that's a yield of 8.3 per cent.

"For investors, those yields are what we'd see them going for more than anything else," says Busch. The CMHC predicts vacancy rates to rise in both Saskatoon and Regina, however, those yields might not hold much longer, especially if purchase prices rise as well.

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