Saskatoon paying renters to buy houses

As the housing boom in Canada continues, Saskatoon, Saskatchewan is taking the unprecedented step of giving renters money to help with a down payment.

While home prices are high across Canada, the boom is being felt even more in the Prairies. Housing has traditionally been less expensive than in the rest of the country, but demand for commodities is fueling blistering growth. According to Statistics Canada, Saskatoon was the fastest-growing metropolitan area in Canada last year. Vancouver was a close second and Regina third.

Prices continued to rise quickly in Calgary and Edmonton, but Saskatoon has now overtaken Alberta's major cities in terms of housing being less affordable. The average home in the city now costs $277,000, 4.3 times the average annual salary of $63,900.

Subsidized housing programs for low-income people exist throughout Canada, but until now there have been no programs to help middle-income buyers daunted by often stratospheric prices.

Saskatoon isn't giving away the money for free — it's offering low-interest loans to renters for the purchase of a home between $220,000 and $280,000. Applicants who meet the criteria will be able to get approximately $12,000.

The move comes amid signs the federal government is becoming concerned Canada's housing market is overheated. Prime Minister Stephen Harper, Finance Minister Jim Flaherty and the Governor of the Bank of Canada Mark Carney have all warned about the effect rising interest rates are bound to have on Canadians who have taken on too much debt.

Flaherty has introduced a series of new mortgage regulations over the last several months aimed at preventing a housing crisis similar to that which helped trigger the financial crisis in the United States in 2007.

While homes are becoming less affordable across the country, prices continue to be worst in British Columbia. The average price for a home in Vancouver is roughly 9.5 times median income. Globally, only Sydney, Australia and Hong Kong are less affordable.

Victoria, Abbotsford and Kelowna were also all ranked as severely unaffordable, all with multiples above five. Toronto and Montreal were the only cities outside B.C. ranked as severely unaffordable. The rankings were compiled by the Winnipeg-based Frontier Centre of Public Policy.

The high prices in B.C. are being blamed by TD Economics for making B.C. the most indebted and vulnerable province in Canada. The ratio of personal debt to disposable income is 160 per cent, roughly the same as that seen in the U.S. just before the mortgage meltdown.

While a recent report from Capital Economics suggests a rise in interest rates could trigger a collapse in housing prices, by as much as 25-35 per cent, don't count on things getting cheaper any time soon. Re/Max predicts the average price for a home in Canada will rise by 3 per cent in 2011 to an average price of $350,000. Just one more reason to move to Saskatchewan.