by Drew Fossum
Ask real-estate agent Don DeMarsh how the housing market in Tisdale is faring and he answers a question with a question.
“Depends on what version you want. Do you want doom and gloom, or do you want the rosy one?” he jokes.
When Albertans started moving back to Saskatchewan in 2007, prices rose and construction boomed, says DeMarsh. A three bedroom, 25 year old bungalow which used to sell for $60,000, started going for $160,000. People were coming back to Tisdale for the first time in years, as the town’s population increased by 180 people between 2006 and 2011.
Tisdale’s housing market hasn’t quite kept pace with the hot markets around the province. Prices have cooled, down 10 per cent from their peak in 2011.
“Northeast Saskatchewan is one of the only places without a commodity boom right now,” says DeMarsh explaining why prices have dropped.
Tisdale’s agriculture-based economy is stable, the timber industry has lost much of the steam it once had, and known natural resources in the area aren’t being developed. The area has grown by a healthy four per cent a year for the last five years, but economic activity has tapered off.
“We aren’t boom town but we’re not sliding either. Holding our own and growing ever so slightly,” says DeMarsh.
Like Tisdale, many towns exist outside of the natural resource bubble. Agriculture is healthy right now, with higher than normal commodity prices, but its ability to increase a town’s population is limited. Farming is becoming more advanced and less labour intensive, and farms are consolidating, meaning fewer and fewer people across the countryside. This gives rise to the question: are rising real estate prices in small towns sustainable if there isn’t a local resource boom driving the increase?
Statistically, the ability to make a living is driving Saskatchewan’s real estate market says Goodson Mwale, a senior market analyst for the Canada Mortgage and Housing Corporation.
A strong economy, matched with low unemployment, is drawing people from across the country and the world. In 2012, Saskatchewan’s unemployment rate was 4.7 per cent, second only to Alberta, and the province boasted wage growth of six per cent in Saskatoon and five per cent in Regina. Mwale says this equates to an increase in population of 97,000 since 2006 and a rise in the price of an average Saskatchewan home from $132,000 to $289,000.
The province’s economic performance and job openings had an effect on Mwale too. He pulled up stakes and moved from Ontario to take his current position. “I guess I am one of those statistics,” he says with a laugh.
But do population and increased wages account for rising prices in rural Saskatchewan too? Partially, he says. Saskatoon and Regina are the preferred cities for people moving into the province but they can’t absorb everyone. Many people spill into the rural areas to chase jobs in the oilfield or potash. At this point it becomes a simple case of supply and demand, where demand drives up the price.
Some towns have job opportunities to match the rise in housing prices. Southwest and southeast corners of the province can take advantage of the oil and gas developments and parts of eastern Saskatchewan have attracted workers for new potash finds and increased production.
This doesn’t mean real estate will be cheaper the further it sits from natural resources. Take Assiniboia for example. It’s set deep in the south central region between the two energy rich corners. It’s a service hub for all the smaller agriculture communities as far south as the U.S. border.
House prices in Assibinoia are not as high as they are in the cities but they are higher than they have ever been, says local real estate agent Shirley Grabeldinger.
She explained the town’s housing market didn’t start to move when the rest of the province did in 2007. But when prices began to climb in 2009, they shot sky high. A three bedroom bungalow with a garage that used to cost between $80,000 to $100,000, went up to $250,000.
There hasn’t been a real influx of economic activity into the area either, but speculators have been the driving force in the real estate game as the oil patch creeps closer to the town, Grabeldinger says.
“We do have some oil and gas moving in, but whether they stay or go, we are primarily an agriculture based community,” says Rochelle Neff, the town’s economic development officer.
She says oil crews stay in Assiniboia, spreading money around town, but no oil related businesses have started up. New businesses are taking root, an $8 million dollar hotel and a strip mall are being built, but high paying oilfield jobs have yet to move Assiniboia’s economy forward.
Six hundred kms northeast of Assiniboia, Meadow Lake is perched above a belt of boreal forest and nestled in rolling farmland. Unfortunately the town is just beyond the oil and gas exploration and there isn’t any potash in sight. Housing prices have risen independent of this though. Homes which went for less than $100,000 five years ago are reaching nearly $280,000. The market has cooled over the last year the prices have yet to go down.
When housing prices rose there wasn’t anything driving them up; they just followed the provincial trend. The town has three lumber mills which employ large numbers of people and farming continues to inject money into the local economy, but nothing to increase the housing market by over 150 per cent.
“When people move here and are looking at houses they can’t believe how high the prices are,” says real estate Catherine Aldous. First time home buyers are struggling to find a house which doesn’t require lots of renovations and is still within their price range. “It’s getting to the point where you just about can’t buy a house,” she says.
Meadow Lake is doing well but there is nothing brewing to increase its economic fortunes. SaskPower is teaming up with a mill to build a bio-mass power converter, though it has yet to get off the ground, and tourism continues to bring money into the area. But as Saskatchewan's economy slows in 2013, is there enough provincial momentum to keep house prices at the current level?
“I think we are seeing a bit of a bubble,” says Dwight Heinrichs, a marketing instructor at the University of Regina. He believes the rural housing market is artificially inflated by low interest rates. Even without an influx of industry, people can afford a loan for an overpriced house.
This is where the small town real estate bubble could burst. If interest rates rise a couple of points, the housing market will become a lot more restrictive and prices will hit a period of stagnation. There is only so much demand for homes out in small communities and if you take away one of the major draws, low interest rates, markets could quickly depress.
This is why bringing in new industries is so important to maintaining a small town’s existence. It allows properties to maintain value, provides jobs to attract young people, keeps schools open, and helps towns flourish. Outside the resource areas, if industry doesn’t come in another form, real estate could devalue slowly.
That being said, the average price of a house in Saskatchewan runs $289,000, nearly $90,000 less than the national average. Small town homes run far less than this amount which means it makes good business sense for people to sell their homes in large urban centres for $400,000 to $500,000, buy a nice house in Meadow Lake or Assiniboia, and have some money left over.
This means moving out into the country will continue to make sense, but its advisable to bring a full piggy bank because chances are there won’t be a high paying job waiting for you when you get there.
Back in northeastern Saskatchewan, home prices are still fairly reasonable. Since they peaked in 2011, they have dipped about 10 per cent. A well-built 25 year-old, three bedroom bungalow will cost $125,000, well below the provincial average.
DeMarsh argues that Tisdale is the best place in province to settle down. There are lakes and forests, it’s a quiet town, and a wonderful place to fish. He also notes that there has been some oil and gas located in the area (though it has yet to be developed) and some jobs could come their way from the proposed diamond mine near Prince Albert.
DeMarsh says the town is ready for the next boom but there are some advantages to slow sustainable growth. “You hear the stories about Estevan’s boom and you think, ‘do you want that?’”