Canadian housing prices surged

Canadian housing prices surged for a second consecutive month in January, dovetailing with unexpectedly strong housing starts data released earlier in the week and underlining the disparity between the Canadian and U.S. economies.

Contractors' selling prices rose 6.5 per cent year over year for January, Statistics Canada reported yesterday, outpacing the 6.2-per-cent annual increase for December.

The biggest gains were posted in Saskatoon, which recorded a staggering 51.7-per cent increase as a flood of one-time Saskatchewan residents cashed out of the Alberta housing market and returned home to a bustling economy that is benefiting from high prices for wheat, oil and gas.

Saskatchewan "had experienced 20 consecutive years of migratory losses, and 2007 recorded a remarkable turnaround," said Richard Corriveau, a Calgary-based economist with Canada Mortgage and Housing Corp. (CMHC).

Year-end numbers have yet to be tallied, but preliminary figures indicate that migration to Saskatchewan in 2007 will set a new record high, Mr. Corriveau said.

Many of those people are looking for jobs and housing, only to find that the resale housing market in certain areas, especially Saskatoon, is virtually non-existent.

"So if you want to get into home ownership, building a home is virtually the only game in town," he said.

Year-over-year housing prices climbed 25.9 per cent in Regina, 19 per cent in Edmonton and 11.4 per cent in Halifax.

The acceleration in price increases in December and January followed 16 months in which gains in new-home prices had been slowing. The higher prices reflect increased labour and material costs and land demand, Statscan said.

Housing starts data released Monday by CMHC outpaced forecasts and was in marked contrast to the United States, where foreclosures are climbing and housing starts are tumbling.

In Saskatchewan, by contrast, the potash, diamond and uranium industries are thriving, along with the research sector, said Harry Janzen, executive officer of Saskatoon Region Association of Realtors.

Mr. Janzen also touched on the returning residents theme, noting that of eight people he interviewed for a technology position this past week, three had recently returned from Alberta.

The city's soaring housing prices are daunting for would-be buyers and even for builders.

"It's made it tougher to do business, because of the constant inflation," said Gordon Holinaty of Saskatoon-based Holinaty Developments Inc., a small contractor that's been in business since 1986 and typically builds two or three custom homes a year.

"In the past, when prices were more constant, we could go back to our files and have a pretty good idea of what things were going to cost for the next project," Mr. Holinaty said. "Now you can't do that, because the prices seem to change every week."

(prepared by Wendy Stueck/Globe and Mail)