Posts Tagged ‘homeownership’

Posted by Moshe Alexander

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.)

Posted by Moshe Alexander

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.

Posted by Moshe Alexander

Renters are having an easier time finding accommodations in Victoria this year. A sluggish local economy and labour market, and a recent surge in homeownership has moved vacancy rates up. As the level of employment has edged lower, relatively fewer people have moved to the region. Historically low mortgage rates and lower home prices reduced monthly mortgage carrying costs, and encouraged some renters to exit the rental market in favour of homeownership. Near record levels of apartment condominium resales recorded across Greater Victoria during the second and third quarters of 2009 reflected this movement from rental to homeownership.

Vacancy rates for both apartments and town homes moved up in the Victoria CMA over the past year. The average apartment vacancy rate edged up to 1.4 per cent, following four years at 0.5 per cent. Similarly, the average vacancy rate for rental townhouses shifted up from 0.1 per cent last October, to 1.8 per cent in October 2009. The trend of increasing vacancies was widespread in the region. Higher vacancy rates were observed across all Greater Victoria municipalities. Both the one and two bedroom segments of the local apartment rental markets recorded increased vacancies. While apartment vacancy rates in Victoria increased in 2009, they remain low compared to other major British Columbia markets (2.1 per cent in the Vancouver CMA and 3.0 per cent in the Kelowna CMA) and the provincial average (2.8 per cent).1

Softer demand for rental housing in 2009 has put less upward pressure on rents. Average one and two bedroom apartment rents edged up 4.5 and five per cent in 2009, respectively.2 This growth was less robust than the 6.8 per cent average rent increase in 2008, when vacancy rates were at their lowest. A substantial range exists between the rents observed across Victoria CMA municipalities. For an average two- bedroom apartment, Oak Bay was home to the highest rents ($1,206), while the lowest rents were found in Esquimalt ($858). When compared to the provincial average, two-bedroom rents are on par, while average one- bedroom rents are eight per cent lower in Victoria.