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.

According to the results of the latest Rental Market Survey conducted by Canada Mortgage and Housing Corporation (CMHC), the rental stayed tight in the Saguenay CMA, as the rental housing vacancy rate reached 1.5 per cent in October 2009, compared to 1.6 per cent in October 2008. While demand for rental housing stayed strong, this year marked a break in a downward trend that had been prevailing since 2005, since this indicator remained relatively stable. The economic uncertainty surely had an impact on the formation of renter households and migration movements. However, given the small increase in supply, the net effect on the vacancy rate was almost nil.

Saguenay was not an exception in Quebec, with the vacancy rates remaining relatively stable in several other CMAs. In fact, only Sherbrooke and Trois-Rivières saw their markets ease, as their vacancy rates of 3.9 per cent and 2.7 per cent, respectively, were the highest in the province. In order, Montréal (with a vacancy rate of 2.5 per cent) and Gatineau (2.2 per cent) followed ahead Saguenay (1.5 per cent), while the Québec CMA (0.6 per cent) brought up the rear with the lowest rate in the province and one of lowest in the country. Across Canada, the vacancy rates were rather stable in more than one third of the CMAs, while they rose in almost all the other areas.

Economic and demographic conditions The employment level in the Saguenay CMA has remained steady since 2003, despite a small decrease in 2008 (-1.6 per cent). For the last quarter of 2008 and the first three of 2009, the average employment level reached 69,300 workers, compared to 68,800 for the same period a year earlier (+0.7 per cent). In addition, the dynamic labour market in the area has maintained the employment rate (the proportion of the population with jobs) around a record level of 55 per cent1. The job market is still holding up, which is maintaining demand on the rental market.

Not only did the dynamic labour market support the formation of renter households thanks to the income generated, but it also enhanced the appeal of the area. Net migration has improved in the Saguenay CMA, as the migration deficits have been getting smaller every year, decreasing from 1,341 people 2004/2005 to 852 people in 2007/2008, according to Statistics Canada estimates. Also, given that mobility is greater among young people (aged from 20 to 29 years) and that most of them are renters, the decreasing migration deficits have without a doubt been contributing to supporting demand for rental housing.

That being said, the uncertain economic conditions that prevailed at the end of 2008 and the beginning of 2009 likely had an impact on migration movements. Traditionally, the Québec CMA has been the main destination of emigrants from Saguenay2. The good performance of the Québec area job market during a difficult period evidently attracted more households seeking new employment opportunities. In these conditions, the growth in housing demand in the Saguenay area will have been less vigorous than in previous years.

The aging of the population is another factor that stimulates rental housing demand. Between 15 and 55 years, the older primary household maintainers get, the less likely they are to live in rental housing. From the age of 55 years, households increasingly choose to rent a dwelling. When they get older, the seniors’ housing market remains an option for some, but the traditional rental market may be an alternative for households who do not have the financial means to move to a retirement home. In addition, over the coming years, household formation will be concentrated among people aged 55 years or older.

New rental housing supply The additional supply of traditional rental housing was rather limited between the October 2008 and October 2009 surveys. In fact, only 50 new traditional rental housing units were completed during this time (this figure, however, excludes units that have been converted into rental dwellings). As well, 50 new duplex units were built between July 2008 and June 2009, potentially adding 25 more dwellings to the rental market (as one out of two units is usually occupied by the owner of these buildings). The stable vacancy rate was therefore also due to the limited supply of new rental units, in addition to the slower growth in demand.

Contrary to last year, when rental market conditions tightened in all sectors of the Saguenay CMA, this year, the results were mixed. The market tightened in Jonquière, on account of two factors: first, the average rent level was lower in this sector and, second, the estimated change in the average rent was less significant there than elsewhere. The Chicoutimi-Sud and La Baie rental markets, for their part, remained stable, while Chicoutimi-Nord was the only sector where conditions eased. More specifically, the Jonquière market, with a vacancy rate that fell from 2.4 per cent in October 2008 to 1.5 per cent in October 2009, has now become almost as tight as the Chicoutimi-Sud market. Still, this last market remained the tightest in the area, with a vacancy rate that reached 1.3 per cent in October 2009, versus 1.0 per cent in October 2008. In La Baie, the proportion of vacancy units remained relatively stable, reaching 2.2 per cent in the fall of 2009, compared to 2.1 per cent a year earlier. Lastly, the vacancy rate in the Chicoutimi- Nord sector rose to 2.1 per cent in October 2009 from 0.7 per cent in October 2008.

The estimated change in the average rent was 3.4 per cent between October 2008 and October 2009. The tighter rental market conditions are certainly not unrelated to this situation. However, the size of the changes varied with the sectors. The sector with the tightest market conditions and the strongest demand in the area, Chicoutimi-Sud, also posted the greatest estimated change in the average rent (+4.6 per cent). The Jonquière sector, for its part, showed the smallest change in the average rent (+1.7 per cent) and a tighter market. This less significant change possibly attracted more households to this sector. As for the other two sectors of the Saguenay CMA, the changes in the average rents were 3.2 per cent in La Baie and 4.4 per cent in Chicoutimi-Nord.

In 2009, the Saguenay CMA had the most affordable rental market among all the Canadian metropolitan areas targeted by the rental affordability indicator. With this indicator at 152, Saguenay came in just ahead of Sherbrooke (151). The more rapid growth in the median income than in the median rent helped make housing more affordable in the area.

The rental affordability indicator is a gauge of how affordable a rental market is for those households who rent within that market. The rental affordability indicator examines a three-year moving average of median income of renter households and compares it to the median rent for a two-bedroom apartment in the centre in which they live. More specifically, the level of income required for a household to rent a median priced two-bedroom apartment, using 30 per cent of its income, is calculated. The three-year moving average of median income of households in a centre is then divided by this required income. The resulting number is then multiplied by 100 to form the indicator. An indicator value of 100 indicates that 30 per cent of the median income of renter households is necessary to rent a two-bedroom apartment going at the median rental rate. A value above 100 indicates that less than 30 per cent of the median income is required to rent a two- bedroom apartment, conversely, a value below 100 indicates that more than 30 per cent of the median income is required to rent the same unit. In general, as the indicator increases, the market becomes more affordable; as the indicator declines, the market becomes less affordable.

According to the results of the Rental Market Survey conducted by CMHC in October, the market remained tight in the Québec CMA, as the vacancy rate stayed at 0.6 per cent. As well, the availability rate, which measures the percentage of units up for rent, was also low (1 per cent). This indicator revealed that a small proportion of tenants intend to put an end to their leases. The percentages of vacant units and available units on the market were therefore low. Demand for apartments has been strong, and supply has increased only slightly in recent years. The economic conditions prevailing in the area have contributed to maintaining demand for rental housing, with the low unemployment rate and solid job market having stimulated the formation of young households and the migration of workers to the CMA. In addition, youth employment rose this year. It should be noted that young households with a primary maintainer aged under 25 years are most often (9 times out of 10) renters.

The Québec CMA has the tightest rental market in the province. And, the Québec area, along with the Regina CMA, also had the tightest rental market conditions in the country. Across the province of Quebec, conditions remained stable in the Gatineau, Montréal and Saguenay areas, as well, while they eased in Sherbrooke and Trois-Rivières. Vigorous demand Since the beginning of the decade, the rental market has been tight in the CMA. It should be pointed out that employment has grown and that the unemployment rate reached an all-time low in 2008 (4.5 per cent). During the first half of 2009, the labour market resisted the global recessionary climate, as employment increased in the first two quarters. However, a decline was noted in the third quarter. In the end, the number of jobs should remain stable in 2009 and rise slightly in 2010 (+0.5 per cent). This contrasts with the conditions observed in the other urban centres across the province, where decreases in employment have been noted since the beginning of the year.

The economic conditions therefore remained favourable in the area, as net migration rose to 4,350 people in 2007/2008, for a gain of 6 per cent over the year before. According to the available data, net migration will be high in the area for the current decade, reaching a total of about 40,000 people, compared to just 20,000 during the 1990s. The large number of new residents is significantly fuelling demand for rental housing. In fact, interregional migration is considerable and mainly composed of young people aged from 15 to 24 years (66 per cent). The international migration component has also increased in recent years, but the area is still losing some residents to other Canadian provinces.

Construction stimulated by market conditions In 2007 and 2008, traditional rental housing construction was less significant than in previous years. This situation, combined with a steady demand, contributed to maintaining the tight conditions observed on the market in the area. Between 2008 and 2009, 459 traditional rental housing were completed, which reflects a small increase in supply, considering the size of the Québec area market and the strong demand. This year, however, construction was more vigorous. In all, 924 traditional apartments were started from January to October 2009, compared to 423 during the same period in 2008.

Market very tight for larger units The larger the unit size, the tighter the market conditions as, in October, the vacancy rate was 0.1 per cent for three-bedroom apartments, compared to 1.6 per cent for bachelor units. The availability rate was also lower for larger apartments (0.5 per cent). As well, the supply of such units was more limited, accounting for an estimated 14 per cent of the universe1. with 10,400 three-bedroom apartments out of a total of 71,900 units. Two-bedroom apartments, for their part, made up 51 per cent of the survey universe.

Conditions tight in all market zones The conditions prevailing in the nine market zones in the CMA reflected a strong demand in all sectors. However, the rental market in the Haute-Ville zone has eased slightly since last year, as the vacancy rate there rose from 0.7 per cent to 1.4 per cent. And, the availability rate in this zone reached 2.2 per cent this pas October–the highest in the area. The estimated change in the average rent could explain this easing of the market in the Haute-Ville zone, as rents there rose by 4.5 per cent over 2008, for the strongest increase among all market zones in the Quebec area. In addition, this zone has the highest rents, with the average rent for two- bedroom apartments having reached $881 per month this past October, or 30 per cent more than the average for the CMA ($676 per month).

It should be noted that the western part of the South Shore (Charny, Saint-Romuald, Saint-Jean- Chrysostome) had a vacancy rate of 0 per cent this past October, compared to 0.2 per cent the year before, while the eastern part of the South Shore (Lévis, Pintendre) saw its market conditions ease this year (with a vacancy rate of 0.9 per cent, up from 0.4 per cent).

Highlights – Gatineau

According to the results of the latest CMHC Rental Market Survey, the rental housing vacancy rate in the Quebec part of the Ottawa-Gatineau CMA reached 2.2 per cent in October 2009, up by 0.3 of a percentage point over a year earlier. The rental market therefore eased but still remained relatively tight. The proportion of vacant units in the metropolitan area was in fact slightly lower than the average for Quebec overall (2.3 per cent). The relative stability of the vacancy rate in the Gatineau area was attributable to the fact that the continued homeownership trend was counterbalanced by strong migration.

Gatineau was not the only area where the rental market showed little change, however, as this was also the case in the Montréal, Québec and Saguenay CMAs. On the other hand, conditions eased in Sherbrooke and Trois-Rivières, two areas where the job losses among young people slowed the rate of household formation. Lastly, in the Ontario part of the Ottawa-Gatineau CMA, the proportion of vacant units remained below the level recorded in Gatineau, rising from 1.4 per cent in October 2008 to 1.5 per cent a year later.

The small rise in the vacancy rate recorded in the Gatineau area was due in part to the job losses that occurred over the past year. Following a particularly good year for job creation in 2008, with an annual gain of more than 5 per cent, the first ten months of 2009 were marked by the elimination of some 5,000 positions compared to the average level for 2008. As is often the case in difficult economic times, the youngest workers sustained the greatest losses, with the average number of jobs among people aged from 15 to 24 years falling by about 4,000 between 2008 and 2009. The slightly tougher labour market conditions therefore limited household formation in this age group and removed some pressure on rental housing demand.

The homeownership trend also contributed to the increase in the vacancy rate in 2009. Despite the economic uncertainties that prevailed at the beginning of the year, the low mortgage rates and the contribution of the public service to the regional economy helped maintain housing starts at high levels. As well, the Gatineau area saw the construction of record numbers of row homes, semi- detached houses and condominium apartments–all housing types that are more affordable than single-detached homes and often preferred by renters accessing homeownership.

However, migration limited the easing of the rental market. In fact, the latest migration data released by Statistics Canada revealed that, between 2007 and 2008, there were 2,800 more in-migrants than out-migrants. It should be specified that, just like in previous years, it was the international component of net migration that contributed the most to the demand for rental housing. During this period, more than 1,000 new residents came from abroad. This trend likely continued in 2008/2009.

Just like the overall metropolitan area, the Aylmer sector did not register a significant change in its vacancy rate compared to October 2008. It should be noted that Aylmer was the sector with the highest proportion of unoccupied apartments in the Gatineau area. In fact, 5 per cent of the apartments there did not have occupants this past fall, compared to 5.2 per cent a year earlier. In the other sectors, the vacancy rates all varied within a narrow range from 1.6 per cent to 2.6 per cent. The difference between these rates and the rate in Aylmer was likely due, firstto the higher rents in this sector and, second, to the steady homeownership trend there. In fact, Aylmer registered the largest volume of homeowner housing starts in the area. A number of renters who already lived in this sector certainly contributed to the surge in property sales there and to the fact that Aylmer once again had the highest proportion of vacant rental units in the metropolitan area.

In Hull, which has more than half of all the rental housing units in the Gatineau area, the vacancy rate remained unchanged, at 1.6 per cent, in October 2009. The popularity of this sector is attributable to its proximity to Canada’s capital and to the presence of institutions of higher learning. Despite the job losses observed among young people since the fall of 2008, which may have caused some not to renew their leases in July, the increase in student enrolment at the Cégep de l’Outaouais and the Université du Québec en Outaouais seems to have helped landlords rent out their available units. In fact, enrolment at these two institutions rose again this past fall. The gain was 3.3 per cent at the Université du Québec en Outaouais while, at the Cégep de l’Outaouais, enrolment reached a record level, mainly thanks to the recent addition of new health programs.

In the Gatineau sector, the proportion of vacant apartments reached 2.6 per cent in October 2009, up from 1.7 per cent in October 2008. Market conditions also eased in the outlying area, where the percentage of unoccupied units rose from 1.3 per cent in the fall of 2008 to 2.3 per cent this past fall. The arrival of many apartments in these sectors during the last year increased the supply of units. In fact, 87 rental dwellings were added in the outlying area between July 2008 and June 2009, compared to 16 the year before. The continued homeownership trend also caused some rental housing units to be vacated, a number of which were still unoccupied in October 2009.