The average rental apartment vacancy rate in Canada’s 35 major centres increased to 2.8 per cent in October 2009 from 2.2 per cent in October 2008. The centres with the highest vacancy rates in 2009 were Windsor (13.0 per cent), Abbotsford (6.1 per cent), Peterborough (6.0 per cent), Calgary (5.3 per cent), and London (5.0 per cent). On the other hand, the major urban centres with the lowest vacancy rates were Regina (0.6 per cent), Québec (0.6 per cent), St. John’s (0.9 per cent), Winnipeg (1.1 per cent), Kingston (1.3 per cent), and Victoria (1.4 per cent).

Demand for rental housing in Canada decreased due to slower growth in youth employment and improved affordability of homeownership options. Rental construction and competition from the condominium market also added upward pressure on vacancy rates.

The highest average monthly rents for two-bedroom apartments in new and existing structures were in Vancouver ($1,169), Calgary ($1,099), Toronto ($1,096), and Ottawa ($1,028). The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Saguenay ($518), Trois-Rivières ($520), and Sherbrooke ($553).

Year-over-year comparison of rents in new and existing structures can be slightly misleading because rents in newly-built structures tend to be higher than in existing buildings. However, by excluding new structures, we can get a better indication of actual rent increases paid by most tenants. The average rent for two-bedroom apartments in existing structures increased in all major centres. The largest rent increases in existing structures were recorded in Regina (10.2 per cent), Saskatoon (8.3 per cent),Victoria (5.0 per cent), and St. John’s (4.9 per cent). Overall, the average rent for two-bedroom apartments in existing structures across Canada’s 35 major centres increased by 2.3 per cent between October 2008 and October 2009.

CMHC’s October 2009 Rental Market Survey also covers condominium apartments offered for rent in Calgary, Edmonton, Montréal, Ottawa, Québec, Regina, Saskatoon, Toronto,Vancouver, and Victoria. In 2009, vacancy rates for rental condominium apartments were below two per cent in seven of the 10 centres surveyed. Rental condominium vacancy rates were the lowest in Toronto, Saskatoon, and Ottawa. However, Regina and Edmonton registered the highest vacancy rates for condominium apartments at 3.0 per cent and 3.1 per cent in 2009, respectively.

The survey showed that vacancy rates for rental condominium apartments in 2009 were lower than vacancy rates in the conventional rental market in Ottawa, Saskatoon,Vancouver, Toronto, Edmonton, and Calgary. The highest average monthly rents for two- bedroom condominium apartments were in Toronto ($1,487),Vancouver ($1,448), Calgary ($1,310), and Victoria ($1,223). All surveyed centres posted average monthly rents for two- bedroom condominium apartments that were higher than average monthly rents for two-bedroom private apartments in the conventional rental market in 2009.

The vacancy rate throughout the St. John’s CMA (census metropolitan area) remained low in 2009. In fact, there was little change in the vacancy rate, which largely reflects the impact of solid economic activity and positive employment growth within the region. Robust residential construction activity, combined with healthy MLS®1 sales and a strong supply of existing homes for sale, translated into continued house price growth, once again making the transition from renting to home ownership challenging for renter households. CMHC’s rental market survey conducted during the first two weeks of October included the enumeration of 3,601 privately initiated apartment units within the St. John’s CMA. The survey identified 31 vacancies within the rental stock, translating into a vacancy rate of 0.9 per cent. This compares to a similar 0.8 per cent vacancy rate recorded in 2008, with the rate below one per cent now for two consecutive years and holding steady at its lowest level since 1980. The vacancy rate was one per cent or lower in every zone within the St. John’s area this year. The biggest change was within Remainder of Metro Area (zone 3), with a rate of 0.3 per cent compared to 0.8 per cent in 2008. St. John’s East (zone 1) posted a vacancy rate of 0.9 per cent versus 1.0 per cent last year. In St. John’s West (zone 2), the vacancy rate was 1.0 per cent compared to 0.7 per cent in 2008. St. John’s City (zones 1-2) posted a vacancy rate of 0.9 per cent versus 0.8 per cent a year earlier. Throughout the St. John’s region, vacancies remained highest in bachelor units at 1.5 per cent and lowest in three bedroom units at 0.4 per cent. The recorded vacancy rate for one and two bedroom apartments was 0.8 per cent for both. Average rents increased across the region for all bedroom types in 2009. The following percentage changes in average rent are based on the fixed sample, which includes structures common to the survey for both years (2008/2009). Bachelor unit average rents increased the most of all bedroom types at 6.2 per cent; one bedroom average rents increased 5.7 per cent; two bedroom unit average rents were up 4.9 per cent; and three bedroom rents increased 5.4 per cent. Overall, the total average rent for all bedroom types combined, advanced 5.5 per cent.

Based on the 2009 survey, bachelor unit average rents were $541; one bedroom average rents were $592; two bedroom units posted average rents of $677; and three bedroom rents came in at $713. Overall, the total average rent for all bedroom types combined was $643. The increase in average rents is a reflection of the upward pressure very low vacancies have exerted on rents since 2008, as well as increasing energy costs and the increased costs associated with operating and maintaining apartment buildings. Once again, current rent levels prevented the construction of multi-unit rental projects in 2009, making the rent/return equation uneconomical for developers and real estate investment trusts (REITs). This has been the situation for more than 20 years within the local rental market. However, local rental market dynamics have been changing, with fewer private owners and increasing corporate ownership. The buoyant St. John’s economy and housing market has seen these corporate entities become increasingly interested in the local rental market. In fact, they have purchased many apartment buildings in recent years. The expectation is that these and other players will engage in new multi-unit apartment building construction activity in the coming years, once average rents reach a point where project development becomes feasible.

The local rental market is driven by a number of factors. These factors have remained fairly constant over time and involve both demand and supply influences. Key factors affecting the demand dynamics for rental accommodations over the short term include economic activity, employment, migration trends and the home ownership rate. The supply side of the local rental market is affected by additions to the rental stock via new construction or conversion of existing space into apartments. Apartment supply can also be reduced by conversion activity when existing rental units get converted to condos or hotels. On rare occasions, demolition of apartments for alternate site use or loss due to fire may also diminish the supply of rental units. While CMHC’s rental market survey historically covered structures containing three or more apartment units only, both demand and supply has always been affected by competition from the secondary rental market (newly surveyed since 2007). This market consists of single-detached units; semi-detached, row and duplex units; and other- primarily accessory suites. Statistics for secondary rented units exclude apartments in purpose built rental structures with three rental units or more, condo apartments, units in institutions, and any dwelling whose type could not be identified in the survey. The estimated number of households in secondary rented units within the St. John’s CMA is quite substantial at 12,896, with an average rent of $653 compared to $618 in 2008. Refer to tables 5.1 and 5.2 for additional details regarding secondary rental market survey results.

Results from Canada Mortgage and Housing Corporation’s recently completed Rental Market Survey* revealed a higher vacancy rate for the Moncton CMA in the fall of 2009. In October of this year, the number of vacant units in Greater Moncton stood at 375. In comparison, there were 234 vacant units recorded at the time of last year’s Rental Market Survey. Consequently, the vacancy rate in Greater Moncton was up from last year’s level of 2.4 per cent to 3.8 per cent in the fall of 2009. The vacancy rate for the popular two bedroom units was consistent with the change in the overall vacancy rate, climbing from last year’s rate of 2.6 per cent to 3.6 per cent. This was not unexpected as two bedroom units account for approximately two thirds of the rental universe in the Moncton CMA. The vacancy rate for one bedroom units reached four per cent in the fall of 2009. This marked a significant increase from the low 1.5 per cent vacancy rate recorded last October. A general desire on behalf of local renters for the increased living space provided by two bedroom units has effectively reduced demand for one bedroom units. Within the tri-community area, Dieppe City had the lowest vacancy rate at 2.2 per cent, followed by the Town of Riverview and Moncton City at 3.4 and 4.0 per cent, respectively. In the outlying areas of the Moncton CMA, the vacancy rate rebounded from last year’s low of 0.9 per cent, climbing to 3.1 per cent. * The survey, completed during the first two weeks of October, is limited to privately initiated structures comprised of at least three rental units that were available for rent or completed before June 30, 2009.

In 2009, economic development in Greater Moncton continued to follow the same positive trend that has defined the region over the past decade. Overall employment, as of the end of October, was on pace to exceed last year’s record setting level. As a result of the stronger job market, Greater Moncton has enjoyed the strongest in-migration of all regions in the province during the past ten years. Housing market conditions in the Moncton CMA, starting last year, have become increasingly favorable to potential home owners. In particular, mortgage rates have remained at historically low levels and new listings have retreated moderately from record levels set in 2008. As a result, home ownership has moved within reach for a larger number of people in Greater Moncton, including those who currently are renters, thus limiting demand for rental units. In the tri-community area, the rental market in the Town of Riverview remained the most stable during the past 12 months, with the local vacancy rate remaining unchanged at 3.4 per cent. Rental unit demand had been on the rise in Riverview in recent years. Despite higher than average apartment starts in both 2007 and 2008, the vacancy rate declined in both years. In 2009, a decline in rental unit demand was offset by reduced rental unit construction, leading to the local vacancy rate remaining unchanged.

In Moncton City, the vacancy rate was comparable to the overall rate for the CMA at 4.0 per cent. Population growth has remained positive in Moncton City proper as the region’s economy continues to support economic development and attract people to the area. However, in-migration in 2009 has slowed compared to last year’s above average pace. In addition, apartment starts in Moncton City in 2008 were higher than the average for the last five years. This resulted in a relatively large infusion of new units in 2009 as projects started last year were completed. As such, local supply was ahead of demand with Moncton City’s vacancy rate rising to 4.0 per cent from last year’s level of 2.4 per cent. The vacancy rates in each of Moncton City’s four separate zones also increased in 2009. The largest fluctuation occurred in East Moncton. Last year, this zone posted Moncton City’s lowest vacancy rate at 1.9 per cent. In the fall of 2009, the vacancy rate in East Moncton was the highest at 4.6 per cent. In contrast, North Moncton had the lowest vacancy rate at 2.7 per cent. Not only was it the lowest, it was also the least changed among Moncton City’s four different zones, climbing 0.6 percentage points from last year’s rate of 2.1 per cent. In Central and West Moncton, the vacancy rate in the fall of 2009 was up to 4.5 and 3.6 per cent, respectively.

In the City of Dieppe, the vacancy rate inched up to 2.2 per cent in the fall of 2009, a moderate increase from 1.8 per cent last year. In general terms, population growth in Dieppe has outpaced both Moncton and Riverview in recent years. As a result, residential development has flourished in Dieppe. During this time, the popularity of semi-detached homes has increased resulting in tremendous growth in the Moncton CMA, with a significant number of new units added in the City of Dieppe as well. With semi-detached homes, consumers can obtain a newly-built product with a mortgage payment comparable to the typical monthly rent for a newer two bedroom apartment, while allowing the owner to build equity in their new home. As such, semi-detached units in Dieppe, which have nearly matched last year’s record setting pace in 2009, continue to lure renters to homeownership. This year, apartment starts are expected to post the third annual decline in Dieppe. However, with fewer consumers seeking rental units, supply and demand have maintained a relative balance, resulting in a moderate 0.4 percentage point change in Dieppe’s vacancy rate.

Demand for privately-initiated rental apartment units in the Windsor Census Metropolitan Area (CMA), switched gears and increased in 2009. The high vacancy rate declined from the record 14.6 per cent in October 2008 to 13.0 per cent in October 2009.Vacancy rates were lower for all apartment types except bachelors, where the vacancy rate increased to 16.9 per cent. Several key factors have contributed to the turnaround in the number of vacant rental apartments in Windsor this fall despite a slightly larger supply. Migration is a key factor in housing demand and outmigration from the Windsor area has lessened. Low unemployment rates draw migrants to a centre in search of work. Windsor’s unemployment rate has been well above the provincial average over the last five years. Not only has this poor employment scenario meant fewer people were moving to Windsor, it has also meant Windsor residents moved elsewhere in search of work. Now that the future regarding the Big Three auto makers is more stable and there is more positive news of upcoming employment opportunities, the number of people leaving the Windsor area is estimated to have peaked in 2008. Higher student enrollment has also exerted downward pressure on rental vacancy rates. In times of high unemployment and with the current government programs promoting retraining, both the University of Windsor and St. Clair College have recorded record high enrolment this fall. Many of these students turn to the rental market for accommodation. Many renters took advantage of favourable buying conditions to enter the homeownership market over the past two years as borrowing rates were low and home prices in the Windsor area were negotiable. As the bulk of this first-time buyer segment has moved through the market at this time, fewer renters were leaving this fall as prices began to recover. In contrast, renters were still leaving the townhouse segment due to the higher rents. The rent for a three-bedroom townhouse averaged $934 in October 2009, an amount which would easily allow for a monthly mortgage payment on a starter home in Windsor. The total vacancy rate for townhouse units increased from 11.7 per cent in 2008 to 12.5 per cent in 2009.

Vacancy rates were lower throughout the zones that make up the Windsor CMA. Downtown Windsor, Zone 1, declined slightly from 17.5 per cent the previous year to 15.6 per cent in 2009. The vacancy rate decreased for one and two bedroom units and was higher for bachelor units. Often renters move up to larger units as they become available. However, very high youth unemployment meant that demand was low for the most affordable rental accommodation. Zone 1 has traditionally had a higher vacancy rate than any other Windsor zone in part due to the large proportion of older structures which often require more repairs and therefore may be considered less desirable by potential tenants. On a positive note, the opening of a satellite campus for St. Clair College’s school of art and design brought about 200 students to the downtown this fall. Further expansion plans in conjunction with the University of Windsor’s music, theatre and fine arts programs could bring a further 700 students to the area within the next two years. The vacancy rate for one bedroom apartments was highest in Zone 2 at 18.9 per cent. This zone has a number of smaller buildings with primarily one bedroom apartments. Smaller buildings, such as those with less than 20 units tend to have higher vacancies during periods of oversupply as tenants have options and preferences for larger buildings which tend to have more security, and professional on-site management. Rents for one bedroom units in this zone remain low in an attempt to lure new tenants or retain existing occupants. Traditionally in Windsor the most popular location for renters to choose is Zone 3- East Outer which had the lowest overall vacancy rate in the City at 10.5 per cent, as well as the lowest one bedroom vacancy rate at 8.5 per cent. The latter was significantly lower than the one-bedroom vacancy rates in surrounding zones. This zone includes larger buildings with prime locations along the river which are more attractive to tenants. These buildings offer newer units and professional on-site management. As well the larger property management firms have the resources available to offer rental incentives which many smaller landlords do not.

The vacancy rate among apartments with at least three units (3+) in the Thunder Bay Census Metropolitan Area (CMA) inched up to 2.3 per cent in October 2009, from 2.2 per cent last year, according to Rental Market Survey (RMS) data released in December by Canada Mortgage and Housing Corporation (CMHC). (See Table 1.1.1) With the October vacancy rate’s slight increase, Thunder Bay now becomes the CMA with the tenth lowest vacancy rate for 33 centres with populations over 100,000 in Canada. Northern Ontario’s other major centre, Sudbury saw its rate rise to 2.9 per cent from 0.7 per cent last year. Meanwhile, elsewhere in Northwestern Ontario, Kenora’s vacancy rate declined to 0.8 per cent from 1.7 per cent in October 2008.

The vacancy rate in Thunder Bay was up only slightly this year as several opposing forces came into play. Improvement in homeownership affordability caused by falling interest rates has encouraged some renters to become homeowners. Low ownership costs in Thunder Bay combined with rising apartment rents reduced the relative cost of homeownership – dampening demand for rental accommodation. There are other factors that have added to rental demand and exerted downward pressure on vacancy rates. Although there has been a long-term out-migration amongst the 18 to 24 renter aged group, important trends emerged recently. Employment in the service sector and 18-24 age groups have held up reasonably well, possibly exerting slight upward pressure on rental demand, as young adults are more likely to rent rather than own. Overall, employment has fallen 5.5 per cent over the past year between the 2008 and 2009 surveys. However, the brunt of the job losses has been in the goods-producing sector and the 25-44 age group, arguably sectors not directly associated with rental demand. Next, demand coming from students in post-secondary institutions has increased rental demand. Enrolment in post-secondary institutions has been growing in Thunder Bay. Less space in student housing has caused spillover in the private market creating demand for units located in proximity to Lakehead University and Confederation College. Laid off workers returning to school as mature students are creating additional demand for private rentals. In addition, recent data has indicated no new sources of rental supply. Going back to 1998, there have been few rental completions added to the supply of rental units in Thunder Bay.

The availability rate1 is a slightly broader measure of what landlords have available to market to prospective tenants. The availability rate refers to the percentage of apartments that are either vacant or for which the existing tenant has given or received notice to move. Once again, availability rates moved in the same direction as the vacancy rate in Thunder Bay. Thunder Bay’s availability rate rose to 3.1 per cent from 2.7 per cent in 2008. Only one of the 15 metropolitan areas in Ontario had a lower availability rate than Thunder Bay, namely Kingston (2.5 per cent). Higher availability rates are a result of higher turnover. (See Table 1.4.)

A number of factors have exerted upward pressure on Sudbury’s vacancy rate. Between October 2008 and October 2009, employment in the mining and related service sector has fallen. The challenges facing global demand for stainless steel have impacted Sudbury’s nickel industry and services related specifically to this sector. While the latest migration results (2007-2008) for Sudbury CMA showed positive net in-migration for the sixth consecutive year, it is more likely that in-migration slowed as well since last fall due to less investment spending in the mining industry. Some of these residents affected by the changing fortunes of the nickel market, may have left Sudbury to find work causing the vacancy rate to rise if they resided in rental housing. Meanwhile, a slowing job market triggered less renter household formation, particularly among the core renter group of young adults aged 18-24, resulting in more young adults remaining in the parental home.

Another factor dampening rental demand has been the shift to homeownership. An improvement of homeownership affordability caused by falling interest rates has prompted some renters to become homeowners over the past year. Although overall sales are lower, affordable priced product is moving well suggesting first time buyers are active.

With the total stock increasing only marginally over the course of the year, changes in the vacancy rate are attributable to changes in rental market demand, rather than fluctuations in supply. There is only a slight change in the rental universe observed between October 2008 and 2009 underlining the lack of new supply or changes to the stock of rental units (See Table 1.1.3). There have been only 58 rental completions in the last ten years according to CMHC’s survey in Greater Sudbury, with 31 coming last year. While the overall vacancy rate climbed to 2.9 per cent, both one bedroom and two bedroom units saw vacancy rates rise by a similar magnitude. Sudbury’s one bedroom stock saw its vacancy rate rise to 2.8 cent from 0.9 per cent while the two bed apartment stock jumped to 2.5 per cent compared to 0.4 per cent last year. Units in direct competition with homeownership saw an increase in vacancy rates as young couples and/or unattached singles move from rental units into homeownership or leave the community altogether.

The vacancy rate for private rental apartment buildings with three or more units in the St. Catharines- Niagara CMA (hereinafter Niagara) was above the national and historical averages. According to the CMHC’s Fall 2009 Rental Market Survey, the vacancy rate edged up to 4.4 per cent in 2009. This was above the 20-year average level of 3.5 per cent, and an increase of 0.1 percentage point from last year. Four main factors placed upward pressure on the vacancy rate. First, record low mortgage rates in combination with lower prices in the earlier part of the year translated into very affordable mortgage carrying costs. Many buyers, in particular first- time buyers, took advantage and moved out of rental accommodation and into home ownership. A comparison of average rents and mortgage carrying costs based on the mortgage terms chosen by most first-time buyers (i.e., maximum amortization period and the minimum down payment allowed) suggests that the gap between the two narrowed by more than 50 per cent in the first quarter of 2009.

Also, youth aged 15 to 24 are a key source of rental demand. Weaker employment among youth in this age group meant that some of them, after losing their jobs, moved back into their parents’ homes, or alternatively, postponed a decision to move out. Total employment for all age groups declined by around 11,000 people or 5.6 per cent when comparing the average level in the 12 months ending September 2009 to average level in the same period a year earlier.Youth employment declined by 4,500 people or 14 per cent, of which 2,900 in full- time positions and the rest in part- time jobs.

Finally, there were fewer international immigrants in 2009, due to the global economic slowdown. Since they traditionally tend to rent after landing in Canada, this implies that rental demand in 2009 was not as strong as in the previous years. Many international migrants find it difficult to settle in the region and land a job. Instead, they prefer to settle in major centres, such as the Greater Toronto Area, where they are more likely to find their first job and where there are established social networks.

According to the latest Rental Market Survey data collected in October by CMHC, the average vacancy rate in privately initiated rental apartments in the Ottawa Census Metropolitan Area (CMA) increased only slightly from last year to 1.5 per cent. Consequently, Ottawa remained one of the tightest rental markets in Ontario.

The low vacancy rate was the result of two contrary influences. On the one hand low borrowing costs coupled with steady employment conditions in the Capital City gave many renters the right incentives to jump into the homeownership market pushing the vacancy upwards. On the other hand minimal rental apartment construction and fewer secondary rental market units kept vacancies low. While both influences roughly balanced each other out, the outflow of households from rental accommodations into homeownership was relatively stronger.

Availability rate is a slightly broader indicator than the vacancy rate, as it captures both the currently vacant rental stock and the stock for which the tenant has given or received notice to vacate. While the vacancy rate remained largely stable at a low of 1.5 per cent, the availability rate jumped from 2.9 per cent in 2008 to 3.5 per cent in 2009.

This suggests that it is possible that some buyers, who are currently renting, have not taken occupancy of their new homes yet, but have already given their landlords their two months notice. The slight jump in availability could also indicate that in Ottawa’s tight rental market, leased units are occupied quite rapidly after they become vacant, maintaining a stable vacancy rate.

Employment performance among first time buyers’ ages 25 to 44 years old has been very resilient, remaining on par with levels this time last year. Labour market recovery for this age cohort has been remarkable and has enabled some potential first time buyers to take full advantage of declining borrowing costs. An economic environment of low interest rates unleashed the pent-up demand accumulated early in 2009. As a result, the movement out of rental and into homeownership in this age group has been significant, pushing vacancy rates upwards.

Another factor supporting the increase in vacancy rate is the weak employment performance among young renters. The age cohort between ages 18 to 24 has been the weakest when compared to other age groups. Total year-to-date full time employment is down 8.7 per cent from last year. Rising unemployment within this age group has obliged some young adults to remain in their parental home, dampening the rate of household formation.

The Barrie CMA rental market experienced softer conditions in 2009. The average vacancy rate for purpose- built rental apartments rose up by 0.3 percentage points this year to 3.8 percent. Several factors contributed to easing demand, including a rebound in homeownership demand and high youth unemployment. Continued moderate migration into Barrie supported demand.

Supply, also, was virtually unchanged, increasing by only 15 units. There were no new purpose-built apartments, but the number of units in the existing universe increased for a variety of reasons.

With a softer rental market the growth in average monthly rent for a two-bedroom unit slowed significantly from last year and came in at 1.2 per cent, well the below the maximum rent increase stipulated by the province.

The economic adjustment has affected employment prospects in Barrie for all age cohorts, but in particular the youngest age cohort of 15-24. This group makes up a significant proportion of Barrie’s labour force, given the region’s overall young population and is also a key source of rental demand. The proportion of the labour force in Barrie made up by the 15-24 year-old age group this year has averaged close to 20 per cent. Both full-time employment and part-time employment for this age group have been trending down. With a slowly recovering economy, young people who had been renting returned to the parental home or doubled up with other youth, while those currently living with parents are staying at home until the economy recovers further.

The rate of migration into Barrie has slowed. Nevertheless migration into Barrie from within Ontario is higher than it is in most other Ontario centres. Moveover, slightly fewer people are moving away from Barrie to other parts of the country. Immigration and births added to the slower, but still significant, population growth rate. A growing and relatively young population continues to support rental demand.

With mortgage carrying costs down due to record-low mortgage rates, first-time buyers have exited rental into homeownership thereby increasing the overall vacancy rate.

The decline in mortgage rates in 2009 put mortgage carrying costs back to where they were in 2006. These payments hit a low in the second quarter, which coincided with an improvement in the employment prospects for the 25-44 year old age group. This is the same age group from which many first-time buyers are drawn, so the surge in existing home sales beginning in the second quarter likely included many purchases by people who were renting at the time.

Renters who move into homeownership usually have relatively high incomes compared to other renters and often occupy the larger, more expensive rental accommodation before their move. Given the significance of the secondary rental market in Barrie, in particular, the number of rented single-detached homes, a number of first-time buyers would be coming from the secondary rental market. As a result, the movement to home ownership in Barrie resulted in a relatively small increase in the primary rental market vacancy rate since some the impact was absorbed in the secondary rental market.

Vacancy rate keeps rising According to the results of the latest CMHC Rental Market Survey conducted in October 2009, the rental apartment vacancy rate1 increased again in the Sherbrooke CMA. After climbing by 0.4 of a percentage point in 2008 to 2.8 per cent, the vacancy rate continued to rise in 2009, reaching 3.9 per cent. As shown in Figure 1, the rental market has now been easing more significantly for the past three years in the Sherbrooke area. However, the proportion of unoccupied units still remained far from the levels observed in the late 1990s, when more than 7 per cent of rental apartments were vacant.

In the other CMAs across the province, the Québec area still had the tightest rental market, with fewer than 1 per cent of apartments vacant. As for the Saguenay, Montréal and Gatineau areas, their proportions of unoccupied units remained relatively stable between October 2008 and October 2009, edging down from 1.6 per cent to 1.5 per cent in Saguenay and rising slightly from 2.4 per cent to 2.5 per cent in Montréal and from 1.9 per cent to 2.2 per cent in Gatineau. In the Trois-Rivières CMA, however, the vacancy rate was up, reaching 2.7 per cent (+1 percentage point). Among all of Quebec’s urban centres with 100,000 or inhabitants, Sherbrooke had the highest percentage of vacant rental housing units in 2009, for a second straight year.

Supply increases while demand slowsThe vacancy rate hike in the Sherbrooke CMA in 2009 resulted from a moderating demand and a rising supply.

On the demand side, migrants who come to an area, whether from other areas of Quebec or elsewhere, are definitely one of the main factors. In fact, most newcomers to an area choose to rent when they arrive. The relationship between migration and the vacancy rate is illustrated in Figure 3, with high net migration often being associated with a tighter rental market and the opposite also being observed.

Preliminary data2 show that no substantial immigration gains should be registered in the Sherbrooke CMA since the last survey. Stagnant immigration is no doubt one of the factors that contributed to moderating rental housing demand in the Sherbrooke area this year.

As well, the Sherbrooke CMA has recorded negative net interregional migration3 of about 100 people among the group aged from 15 to 34 years4, for the past two years. In other words, more young people left the capital of the Eastern Townships than settled there. This decrease therefore moderated demand for rental housing units, as the young population is an important client group on the rental market. In fact, according to data from the latest census (2006), most Sherbrooke area households whose primary maintainer is aged from 15 to 34 years are renters.

In addition to migration, several other factors contributed to slowing rental housing demand in the Sherbrooke CMA in 2009. One such factor was that the labour market was less favourable for young people (labour force aged from 15 to 24 years) between the October 2008 and October 2009 surveys. Compared to last year, the average employment level fell by 14 per cent among young people aged from 15 to 24 years, with this decrease mainly affecting full-time jobs (-24 per cent). In these conditions, many young people may have been deterred from leaving the family home, or encouraged to share accommodations, which also slowed demand on the rental market.
Changes in the age structure of a population (in this case, the aging of the population) may also have an effect on the proportion of unoccupied rental housing units in an area. According to our latest demographic projections, the growth in the number of young households (aged from 15 to 34 years) in the Sherbrooke area will be relatively weak, if not stagnant, between 2008 and 2009, which will limit the potential renter client pool. Negative growth is even forecast for the next few years, which will further curb demand on this market.

Another major reason for the vacancy rate increase is that financing conditions have been favourable to home buying, which means that a number of renter households possibly became homeowners. In fact, the strong sales of existing and new homes registered in the CMA in recent years seem to support this point. The same scenario was likely repeated in 2009, which again drove up the percentage of vacant units in the Sherbrooke area.

With such demand conditions and a rental housing supply that increased by 2.5 per cent between our last two surveys (from 30,842 units in 2008 to 31,621 in 2009), it was therefore not surprising to see a hike in the vacancy rate in 2009 in the Sherbrooke CMA.

Lastly, it should be mentioned that, even with the low vacancy rates observed in recent years, the growth in the supply on the rental market has been rather limited. It should not be forgotten that, in the late 1980s, rental housing construction had been very strong in the CMA, such that the vacancy rates had hovered around 10 per cent in the years that followed. Some builders may have then decided to focus their activities on other market segments. Now, even with the low vacancy rates registered in recent years, rental housing construction has never returned to its previous pace. This is generally the case, as a lag is often observed between changes in the vacancy rate on a market and the ensuing adjustment in the level of rental housing starts.