The Saskatoon housing market is showing strong evidence of problematic conditions according to a report from Canada Mortgage and Housing Corporation (CMHC).
The housing market assessment, out Thursday, found strong evidence of overbuilding in the Saskatoon market.
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A factor cited by CMHC for problematic conditions in the real estate market is the downturn in the economy due to lower oil and potash prices and a rise in unemployment.
The report found that the number of completed and unsold homes rose sharply in the second quarter of 2016, despite a 22 per cent drop in housing starts so far this year.
“This is symptomatic of a market where weak economic conditions have greatly reduced the absorption of new housing units upon completion and from existing inventory,” states the report.
“This is particularly the case with condominium apartments and row houses where inventory levels were significantly higher in June 2016 than in June 2015.”
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A buyers market is reflected in housing prices, with CMHC downgrading the risk of overvaluation from strong to moderate.
The report states that despite this change, the “price level in Saskatoon remains higher than what is expected from fundamentals such as growth in personal disposable income and population aged 25 to 34.”
“This imbalance could be resolved either by a further slowdown in price growth, a pickup in income and population growth, or a combination of both.”
Evidence of an overheating market and price acceleration remained weak.
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CMHC also released its long-term outlook for the Saskatoon housing market.
Housing starts are expected to edge higher in 2017 while downward pressure on resale prices are expected to persist through next year, keeping price gains modest.
Sales are also expected to decline through the remainder of 2016 but remain stable through 2018.