February 3, 2009 – Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting the Trois Rivieres CMA Rental Market
Moishe Alexander’s Review
Trois-Rivières, Quebec - Credit cloneofsnake, Flickr
The rental market eased slightly in the Trois-Rivières census metropolitan area (CMA). In fact, the vacancy rate reached 1.7 per cent this past October, compared to 1.5 per cent one year earlier. This very small increase in the vacancy rate for the CMA did not extend to all sectors, though, as conditions eased only in the North, Trois Rivières-Ouest, and Cap-de-la-Madeleine and Saint-Louis-de-France zones. The average rent for two-bedroom apartments in existing structures rose by 3.0 per cent. On average, tenants had to pay $505 to rent such a unit this fall, in comparison with $487 in October 2007.
Notice to readers
Starting this year, rental apartment structures serving senior clients exclusively will be excluded from the survey. For more information, see the Technical Notes section at the end of the report.
Trois-Rivières rental market eases slightly
The vacancy rate rose marginally this fall in the Trois-Rivières census metropolitan area (CMA). According to the results of the Rental Market Survey conducted in October by Canada Mortgage and Housing Corporation (CMHC), the proportion of unoccupied units reached 1.7 per cent, compared to 1.5 per cent in the fall of 2007. This second rise in the vacancy rate in as many years has allowed the market to ease somewhat since reaching a low point in 2006. Even with these increases, though, it should be pointed out that the vacancy rate still remained relatively low, having stayed below the 2-per-cent mark for a sixth straight year. The situation in recent years contrasts with the conditions that prevailed in the late 1990s, when the vacancy rate was close to 8 per cent in the Trois- Rivières area. A sustained housing demand, combined with low rental housing construction volumes during the 1990s, has since progressively pushed down the proportion of unoccupied units. In the fall of 2008, there were consequently 273 vacant units out of a total stock of 15,920 apartments contained in privately initiated buildings with three or more housing units.
Strong migration maintains rental housing demand in Trois-Rivières
While the low vacancy rates that have been prevailing in the Trois- Rivières CMA for several years have greatly stimulated rental housing construction, the strong migration has kept demand for rental dwellings at high levels. In fact, since 2002- 2003, rental housing starts have virtually exploded (370 starts on average annually), significantly increasing the supply of units in the CMA. Over the same period, net migration in the Trois-Rivières area reached unprecedented levels (more than 500 newcomers per year since 2003), which put upward pressure on demand for rental housing. Trois-Rivières, like several other areas, must contend with an aging population and get more workers to take up the slack. The area has therefore introduced programs in the last few years to help welcome, and especially retain, international immigrants. These programs have obviously produced results, as evidenced by the high net migration levels recorded in the Trois-Rivières area since 2002. In fact, the international share of total net migration has now reached close to 40 per cent. As such, despite a job market that has been recording ups and downs since the beginning of the current decade, the Trois- Rivières area is effectively succeeding in attracting a large number of international migrants. Given that the increase in the supply of units has exceeded demand in the last two years, a slight easing of the market was felt. As the rise in supply slightly exceeded demand in the last two years, the market eased somewhat.
Elsewhere across the province
In October 2008, diverging trends were noted in Quebec’s six CMAs. While rental market conditions eased in the Sherbrooke and Trois- Rivières CMAs, the Gatineau, Québec, Montréal and Saguenay areas registered decreases in their vacancy rates. This fall, the Québec CMA had the lowest vacancy rate (0.6 per cent), followed by Saguenay (1.6 per cent), Trois-Rivières (1.7 per cent), Gatineau (1.9 per cent), Montréal (2.4 per cent) and Sherbrooke (2.8 per cent).
Market conditions tight in all sectors except Downtown and Bécancour
In the fall of 2008, the vacancy rate remained relatively low, that is, below 1.5 per cent, in most sectors of the CMA. Only the Downtown and Bécancour zones had less tight market conditions, with vacancy rates of 3.2 per cent and 5.2 per cent, respectively. As in previous years, these two zones had the highest vacancy rates in the CMA, the first, because this sector has the oldest rental housing stock in the area (70 years, on average) and, the second, on account of the fact that there are fewer services nearby (hospital, etc.).
Vacancy rate still low for apartments with two or three bedrooms and more
In October 2008, market conditions eased marginally for all apartment categories. Like in previous years, roomier apartments, that is, those with two bedrooms and those with three or more bedrooms, had the lowest vacancy rates, at 1.2 per cent and 1.4 per cent, respectively (compared to 2.3 per cent for one bedroom apartments and 4.3 per cent for bachelor units). These bigger apartments suit many people, especially students and families. They also provide tenants with more versatility, allowing them to use a room as a home office, for example. These larger apartments therefore target a broader client group and are usually easier to rent than smaller units. In 2008, market conditions eased the most for apartments with three or more bedrooms, as their vacancy rate rose from 0.8 per cent in October 2007 to 1.4 per cent a year later. The arrival of many units of this type on the market over the past year partly accounts for this increase.
Very few newer units vacant
While they command the highest rents, on average ($645), newer units, that is, those built in 2000 or later, had the lowest vacancy rate, at 0.5 per cent. These units seem to be preferred by tenants, who do not hesitate to pay a little more to get a unit in a recent building with contemporary features. Conversely, it can be noted that older apartments (built before 1960) registered the highest vacancy rate (2.8 per cent). These units are, to no great surprise, much more affordable, and by far, as they effectively rent for close to $200 less per month ($409).
Rent increases above inflation
The rent increases were significant in October 2008. In fact, the average rent for two-bedroom units rose from $487 in October 2007 to $505 in October of this year. The fact that the vacancy rate for two bedroom apartments remained low this fall partly accounts for this increase in the average rent. Not surprisingly, the North and Trois- Rivières-Ouest sectors had the highest average rents in October 2008, at $552 and $537, respectively (for two-bedroom apartments). Rental housing construction has been vigorous in recent years in these two zones. The arrival of new units, which usually command higher rents, pushed up the average rents in these geographic sectors. Conversely, the Downtown sector had the lowest average rent for two bedroom units this fall ($449), on account of the advanced age of the housing stock there. Contrary to what one might think, Figure 7 apartments in the highest rent ranges had the lowest proportions of vacant units. In fact, units commanding rents averaging at over $500 all registered vacancy rates below 1 per cent this fall. Since apartments in newer buildings post the highest rents, these results support the hypothesis that tenants are willing to pay more for units with modern features. In order to exclude the impact of new structures and conversions added to the universe between surveys and therefore get a better indication of the change in rents charged in existing structures, it is useful to analyze the change in rents using a fixed sample of existing buildings. Between October 2007 and October 2008, the average rent for two-bedroom apartments in existing structures rose by 3.0 percent.
Availability rate remains stable
The availability rate remained stable this fall, at 2.1 per cent. Taking into account not only vacant units but also units for which the existing tenant has given, or has received, notice to move, and a new tenant has not signed a lease, the availability rate gives a slightly broader idea of the short-term supply of unoccupied units. As was the case for the vacancy rates, the Downtown and Bécancour sector also had the highest availability rates in the fall of 2008, at 3.2 per cent and 5.2 per cent, respectively. All the other zones had availability rates below 3 per cent.
Vacancy rates stay high elsewhere in the Mauricie area
Elsewhere in the Mauricie area, the rental market tightened somewhat this fall in the agglomerations of La Tuque and Shawinigan. In fact, the proportion of vacant units in La Tuque reached 8.4 per cent in October 2008, down from the level recorded in 2007 (9.9 per cent). In Shawinigan, the vacancy rate fell marginally, to 5.4 per cent (versus 5.7 per cent a year earlier).
Vacancy rate expected to keep rising slightly
The significant rental housing construction in recent years will contribute to slightly driving up the vacancy rate in the Trois-Rivières CMA. In fact, since the beginning of the current decade, over 2,000 new rental housing units have been built, and activity will remain just as strong in 2008 and 2009 as in previous years. In addition, the slowdown in employment, which will continue until the end of 2009, should dampen demand for rental housing. However, despite the anticipated slight easing of the market, the vacancy rate will remain low, on account of a sustained demand for rental housing resulting mainly from the strong migration. The main driving force behind the rental market for the last several years in the Trois-Rivières area, migration will effectively continue to stimulate demand for rental housing from now until the end of 2009. Consequently, the supply of new units will contribute to pushing up the vacancy rate, but the strong migration will limit the increase, by putting upward pressure on demand for rental housing in the Trois-Rivières CMA in 2009.
You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64463/64463_2008_A01.pdf
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