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.

The overall vacancy rate in Halifax stood at 2.9 per cent in October, down from 3.4 per cent last fall. Vacancy rates in the Halifax Regional Municipality (HRM) trended down in all submarkets but one in 2009. Average rents, based on structures common to both the 2008 and 2009 surveys, were up 2.8 per cent. In the HRM, Halifax City saw the largest decline in vacancies as the rate fell from 2.7 to 2.0 per cent in 2009. The Mainland North area of Halifax City saw the vacancy rate fall a full percentage point to 1.6 per cent. This submarket has a significant impact on the overall HRM vacancy rate as it is home to 28 per cent of the rental stock – the most of any submarket. On the other side of the harbor, Dartmouth City saw a more modest decline in vacancies from a rate of 5.5 to 5.2 per cent in 2009. Dartmouth North again saw the highest vacancy rate in the HRM at 5.6 per cent in 2009 while Dartmouth East recorded the only increase in vacancies – climbing from 4.4 to 5.4 per cent. The Metro Halifax vacancy rate of 2.9 per cent is only slightly higher than the national average of 2.8 per cent. Apart from Windsor, Halifax saw the largest decline in vacancies in 2009

with a 0.5 percentage point decrease. Canadian cities with the lowest vacancy rates in 2009 were Quebec City, Regina and St. John’s with rates of 0.6, 0.6 and 0.9 per cent respectively. Three of the cities with the highest vacancy rates, Calgary, Peterborough and Abbotsford also saw the largest increases in 2009 as vacancies climbed more than three percentage points in each of these major centres. Vacancy rates have remained relatively stable in Halifax for the past decade. In fact, the 2009 vacancy rate of 2.9 is only slightly below the ten-year average vacancy rate of 3.0 per cent. The vacancy rate has not fluctuated much over that time period, in spite of significant levels of new construction and new rental units being added to the supply. Over the past ten years, there have been approximately 585 new rental units added to the supply each year. Currently, there are nearly 600 more rental units under construction (as of October 2009) in the HRM most of which will be completed over the next 12 to 18 months. It is expected that current demand will be sufficient to offset the additional supply and keep vacancy rates within the recent ten-year range. Average rents in Halifax, increased by 2.8 per cent in 2009 compared to 2.0 per cent growth in both 2007 and 2008. This percentage increase is based on a fixed sample methodology including structures common to both this year’s and last year’s survey. Rents increased in response to the elevated demand that pushed vacancy rates downward. Based solely on this year’s sample, the average rent for a two- bedroom unit in Halifax was $877 in 2009. * 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.

Demand for two-bedroom units increased the most in Halifax in 2009. Two-bedroom units account for nearly 50 per cent of the rental stock in the city and saw the largest decline in vacancy rates from 4.2 to 3.3 per cent in 2009. The decrease in two-bedroom vacancies was largely impacted by the halving of the vacancy rate in Mainland North from 3.0 to 1.5 per cent. One and three-bedroom units saw more moderate vacancy rate declines from 2.8 to 2.4 per cent and from 2.9 to 2.7 per cent respectively. Bachelor units were the only bedroom-type to see an increase in the vacancy rate from 2.1 to 2.5 per cent in 2009. The vacancy rate in the south end of the Peninsula remained unchanged at 1.3 per cent with this area continuing to report the lowest rate in the HRM. Dartmouth North saw its vacancy rate decline from 6.1 to 5.6 per cent in 2009, but retained its 2008 position as having the highest vacancy rate in Halifax.

In terms of age, newer buildings continue to record the lowest vacancy rates, albeit slightly higher than last year. In buildings built since 2000, the vacancy rate increased from 0.8 to 1.0 per cent. This rate is less than half the rate of buildings built prior to 2000. Buildings built prior to 1974 saw the largest decline in vacancy rates of 1.3 percentage points. The oldest buildings (i.e., those built prior to 1960) saw vacancies decline from 4.5 to 3.2 per cent while the next oldest group (i.e., those built between 1960 and 1974) saw vacancies decline from 5.7 to 4.4 per cent. Based on building size, larger buildings continued to record the lowest vacancy rates in the city. Buildings with more than 100 units saw vacancies decline from 2.6 to 2.1 per cent. Smaller buildings with six to 19 units saw the highest vacancy rate of 3.8 per cent in 2009, but also the largest decline from 4.8 per cent in 2008.

The overall average rent increased 2.8 per cent in 2009 based on units common to both the 2008 and 2009 surveys. Three-bedroom units saw the largest increase of 3.1 per cent, while one-bedroom units saw the lowest increase in average rents of 2.6 per cent. Just as in 2008, the average rent increases for two- bedroom units matched the overall HRM increase of 2.8 per cent. In terms of submarkets, Peninsula South saw the most growth in average rents at 4.2 per cent while Dartmouth North saw the lowest increase in average rents of 1.9 per cent. Based solely on the 2009 survey data, the average rent for a two-bedroom apartment in Halifax was $877 per month as of October. Peninsula South remains the highest priced market in the HRM with an average two- bedroom unit renting for $1,318 per month which is 50 per cent higher than the overall HRM average. All other submarkets saw rents below the overall average except for Peninsula North which is just one per cent above the average. The lowest average rents can be found in Dartmouth South and Mainland South where two-bedroom units rent for $683 and $728 per month respectively. Newer buildings continue to

In 2001, the vacancy rate in Charlottetown reached a record low of 1.8 per cent, as the construction of rental units was somewhat limited throughout the 1990′s. In response to the low vacancy rate, local developers built higher levels of rental buildings from 2002 to 2006. This strong level of rental construction resulted in a rising vacancy rate from 2003 to 2007. Last fall this trend was reversed, as the vacancy rate declined for the first time in five years due to reduced rental construction in 2007 and 2008. However, the vacancy rate inched back up this year as rental starts are once again on the rise. The increased level of construction pushed the vacancy rate for apartment structures containing three or more units in the Charlottetown CA to 3.4 per cent up from 2.3 per cent last year. The October 2009 survey aggregated the rental information for 3,888 rental units in the Charlottetown area, which was up from the 2008 figure of 3,790 units. Of the surveyed units, 131 were vacant in 2009, compared to 86 vacant units during the same period last year. The 2009 survey revealed that vacancies among two-bedroom units, which make up the majority of the local rental universe, were higher with 78 vacant units, compared to 54 units last year. As a result, the vacancy rate for two-bedroom units rose to 3.1 per cent from 2.2 per cent last year. Among the other unit types the change was more pronounced. One- bedroom units recorded the largest change, as the vacancy rate for these units increased from 2.0 per cent last year to 4.4 per cent in 2009.

Overall, the average rent in Charlottetown was $658 per month in 2009. For the fourth year in a row, CMHC is measuring the change in rents for existing structures (i.e., those common to the current and previous years’ surveys). Focusing on existing structures excludes the impact of new structures added to the rental universe between surveys and provides a better indication of the rent increase for existing structures. For the Charlottetown CA, the average rent for all bedroom types in existing structures increased by 4.8 per cent in October 2009 compared to a year ago. This year’s increase of 4.8 per cent is very close to the 5.0 per cent increase allowed for heated premises by the Island Regulatory and Appeals Commission (IRAC), which manages residential rental increases on the Island. As most of the units in the Charlottetown area include heat in the rent, it is not unexpected that the actual increase mirrored the increase allowed by IRAC. In 2009, there was very little reason to discount rents now that all of the projects built over the past six years have been integrated into the market. Also, owners were looking to increase rents in an effort to make up for the high heating costs experienced in the 2007/2008 winter due to the rapid rise in the price of heating oil. There was a significant difference in the increase in two-bedroom rents recorded in Zone 1 (Downtown) and Zone 2 (Peripheral). In Zone 1, the average two-bedroom rent advanced by 3.9 per cent, while in Zone 2 the increase was more impressive at 5.8 per cent, as measured by the fixed sample.

In addition to the vacancy and rent data that is collected each year as part of the annual Rental Market Survey, landlords and property managers were asked about rental unit availability. A rental unit is considered available if the existing tenant has given, or has received, notice to move, and a new tenant has not signed a lease; or the unit is vacant. Based on the results from the 2009 Rental Market Survey, the availability rate in the Charlottetown CA moved up to 4.9 per cent in 2009 from last year’s level of 4.0 per cent. Within the CA, the availability rate was identical in both Zones 1 and 2 at 4.9 per cent. Among the different bedroom types, one-bedroom units posted the highest availability rate in 2009 at 5.8 per cent. The availability rate for bachelor and two-bedroom units was 4.8 per cent for both.

According to the 2009 Rental Market Survey, the largest apartment buildings in the Charlottetown area command the highest average rents and enjoy the lowest vacancy rates. In the October survey, apartment buildings in the Charlottetown area with between 50 and 99 units posted the lowest vacancy rate at 1.8 per cent, which was well below the overall vacancy rate of 3.4 per cent. The second largest buildings in the area, ranging from 20 to 49 units, also saw lower vacancies with a rate of 3.0 per cent. In addition to having the lowest vacancy rate, the largest buildings also commanded the highest average rents. Buildings with 50 to 99 units had an average rent of $760, while the smallest structures, those with three to five units recorded an average monthly rent of $608. This escalation of rents from smaller to larger buildings is logical, when considering that more amenities tend to be offered to tenants as the building size increases. These features such as elevators, underground parking, security measures and common rooms raise the construction and operating costs for owners, which in turn are passed on to tenants.

Moishe Alexander’s Review

Niagara Falls, Ontario - Credit Flickr Creative Commons

The apartment vacancy rate in the St. Catharines-Niagara Census Metropolitan Area (CMA) edged up to 4.3 per cent in 2008 from four percent in 2007. The vacancy rate reversed back to its 2006 level. Although the movement of renters into home ownership slowed, fewer youths entered the rental market leading to increase in vacancies. The vacancy rate will shift back to four per cent in 2009, as movement to home ownership slows.

Vacancy Rate Trends Up

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 provincial averages. According to the Fall 2008 Rental Market Survey conducted biannually by the Canada Mortgage and Housing Corporation (CMHC), the vacancy rate moved higher to 4.3 per cent in 2008 from four per cent last year and above the ten-year average level. Softer demand for rental apartments across almost all bedroom types contributed to the increase in the vacancy rate. Demographic and economic factors are the main drivers of rental demand. Niagara’s population has been declining since 2004 with the number of deaths exceeding and growing faster than the number of births. Moreover, the latest statistics show that there are nearly as many people leaving the region (mostly to other provinces) as there are moving into it (mostly international immigrants). This is in contrast to the positive contribution from migration to population growth the region had been experiencing in the decade prior to 2004.  Typically, international imigrants, who are the main driver of migration into the region in recent years, tend to rent a home when they first arrive. Later on, with better employment opportunities they decide to move into ownership. With fewer immigrants choosing Niagara as their new home, the demand for rental subsided. Overall, the negative population growth eased demand for rental accommodation in the region. A strong labour market supported the movement of renters into home ownership, however at a slower pace than in the past. According to the 2006 Census, the ownership rate in Niagara is 74.6 per cent, well above the national average rate of 68.4 per cent. Over the last 15 years, (i.e., the latest three census periods) the home ownership rate in the region gained more than three percentage points. Job growth during the January-September period of 2008 was 3.4 per cent from the same period last year. Job creation in service-producing sectors accounted for the major part of the employment growth. It is worth noting that employment grew strongly among young people aged 15-24, an age group which typically prefers renting. However, the employment growth has not translated into demand for rentals, as jobs were created only in part-time positions in the service sectors. On average, employment in the service industry doesn’t command as high a wage as a job in the goods-producing sector. Therefore, this didn’t lead to a push in demand for rental apartments. In general, there is a tendency for young people to stay longer in their parents’ home, since with a more competitive labour market they need to spend more time on education. There are other factors which affected the vacancy rate. While the number of purpose-built rental unit completions remained unchanged (67 units in the four quarters ending with the second quarter of both 2008 and 2007), the conversion of some units from rental to condominium caused the stock of rental accommodation to shrink by 0.7 per cent to 15,574. This reflects the fact that some property managers facing softer conditions in the rental market decided to convert their properties into ownership units. This helped limit the increase in the vacancy rate.

Vacancy Rates Increased for Apartments in Almost All Size Categories

Vacancy rates have gone up for all apartment types but 3-bedroom apartments. The vacancy rates for one- and two-bedroom apartments determined the direction of the overall vacancy rate since they account for almost 90 per cent of the total rental apartment universe. The vacancy rate for one-bedroom apartments (37 per cent of the universe) widened to 4.6 per cent from 3.9 per cent last year. Similarly, the vacancy rate for two-bedroom apartments (52 per cent of the universe) edged up to 4.1 per cent from 3.9 per cent.

Rents Increase Less Than Inflation

Despite weak demand for rental housing, average rents in Niagara continued to rise. The average rent for a two-bedroom apartment in the fixed sample, which focuses on the comparable units and excludes the impact of changes in the rental stock due to construction, demolition and conversions, increased 1.8 per cent between October 2007 and October 2008. This is slightly lower than the increase of 1.9 per cent a year earlier. Still, this increase was above the Residential Tenancies Act Guideline for 2008 of 1.4 per cent. The increase in rents was less than the year-overyear inflation rate of 2.6 per cent.

Weaker Demand for Some Services Drives Up Vacancies in Niagara Falls

Although the overall vacancy rate moved higher, the vacancy rates varied across the seven zones in which Niagara is divided for rental market survey purposes. The vacancy rates increased in three zones and decreased in the other four. The largest increase, from 2.5 per cent in 2007 to 5.9 per cent in 2008, occurred in the vacancy rate for the core of the City of Niagara Falls (Zone 3). This vacancy rate was the highest among the seven zones and was the same as the Zone 3 vacancy rate in 2006. This market is dependent on tourism and ancillary services and the decrease in the number of customers at gambling facilities led to a reduction of the workforce in the information, culture and recreation services industry. This in turn reduced rental demand and pulled the rate back to the high levels which are usual in this zone. An increase in the vacancy rate in Zone 2 (non-core area of the City of St.Catharines) from 2.7 per cent in 2007 to 4.7 per cent this year has also contributed to the overall increase in Niagara’s vacancy rate, as almost a third of the total rental stock is located here.

Vacancy Rates High in Older Buildings and for Low-Rent Apartments

Despite their lower rents, the vacancy rate was higher in relatively older buildings. Compared to the previous year, the vacancy rate has gone up in buildings constructed before 1974. Newer buildings, especially those built after 1990, benefited from a decline in the vacancy rate. Since around 41 per cent of the total rental stock was built between 1960 and 1974 period, the increase in the vacancy rate in buildings constructed during that period from 3.6 per cent last year to 4.8 per cent in 2008 lifted the overall average vacancy rate higher. Although the rents in larger buildings are relatively higher, renters prefer large buildings, as the availability of amenities makes them more attractive. The vacancy rate in buildings with over 100 apartments was the lowest at 2.4 per cent. About 20 per cent of apartments are in buildings with at least 100 units. The vacancy rates for higher-rent units (those between $800-899, and above $900) were relatively lower compared to less expensive units. Yet, the vacancy rate increased for expensive rental units (above $900) from 1.5 per cent in 2008 to 3.3 per cent. As this rent range competes with homes with modest prices, some renters opt for homeo wnership rather than paying a high rent.

Townhouse Vacancy Rate Higher Too

Rental townhouse (row) vacancy rates also increased, to 5.8 per cent in 2008 from 5.1 per cent a year ago. The same factors raising apartment vacancy rates were at play here. Further movement into home ownership eased the vacancy rate in townhouses. At 848 units, they account for only around 5 per cent of the rental stock.

Availability Up in Tandem with Vacancies

Rental availability rate provides a broader supply measure of what a landlord has available to market to prospective tenants than does the vacancy rate. The availability rate measures the combined incidence of vacant units, as well as units where the existing tenant has given notice to move but has not yet vacated the unit and the landlord has not yet found a replacement. Consistent with the vacancy rate, the availability rate in Niagara trended higher in 2008. According to CMHC’s Rental Market Survey, 6.8 per cent of rental apartments were considered available for renting in October 2008, up from 5.7 per cent last year.

Affordability Slightly Lower

The rental affordability indicator is a gauge of how affordable a rental market is for those households who rent within that market. A generally accepted rule of thumb for affordability is that a household should spend less than 30 per cent of its gross income on housing. 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 re-quired 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 CMHC’s new rental affordability indicator, affordability in Niagara’s rental market weakened slightly in 2008. The cost of renting a median priced two-bedroom apartment increased by 2.2 per cent, while the median income of renter households improved by only 0.5 per cent. The rental affordability indicator in Niagara stands at 102 in 2008, down from 104 the previous year.

Rental Market Outlook

The private apartment vacancy rate in Niagara is expected to slightly tighten reto four per cent in 2009. The expected slowdown in the economy coupled with announced lay-offs will limit income growth, implying fewer people will move into home ownership. Demographic trends will continue to have an important impact on the rental market. The aging of the population suggests demand for rental will increase. Senior households are expected to continue to move back into rental as their children leave home, since this is more convenient as they will no longer be responsible for maintenance and they will obtain equity cash to supplement their old age income. Also, rental buildings are typically located closer to necessary amenities such as medical assistance and transportation. An expected rebound in the number of international migrants who will come to live in Niagara will also raise demand for rentals.

You can find the entire report in PDF format through the following link:

http://www.cmhc-schl.gc.ca/odpub/esub/64451/64451_2008_A01.pdf

Moishe Alexander’s Review

Highlights

Quebec City - Credit David Paul Ohmer, Flickr

Moishe Alexander says that the rental market tightened again this year in the Québec census metropolitan area (CMA). In fact, the vacancy rate fell from 1.2 per cent in October 2007 to 0.6 per cent in October 2008. Supply grew much less significantly as, this year, the area saw the addition of 467 units to the privately initiated rental housing stock, compared to 684 in 2007 and 771 in 2006. Zone 81 (Charny, Saint-Romuald, Saint-Jean-Chrysostome, etc.) still had the lowest vacancy rate, at 0.2 per cent.

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.

Rental market tightens in the Québec area

Moishe Alexander says that according to the results of the Rental Market Survey conducted by CMHC in October, the vacancy rate decreased in 2008, in the Québec census metropolitan area (CMA). From 1.2 per cent in 2007, the vacancy rate has now fallen to 0.6 per cent. In concrete terms, this means that, out of a stock of 70,740 rental housing units2, 433 apartments were vacant this past October. The limited rise in rental housing supply and a strong demand fuelled by the growth of the job market and the increase in net migration account for these results. Diverging trends were noted in Quebec’s six CMAs. While rental market conditions eased in the Sherbrooke and Trois-Rivières CMAs, the Gatineau, Montréal, Québec and Saguenay areas registered decreases in their respective 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).

Strong demand

Moishe Alexander says that while the market had eased somewhat between 2002 and 2006, conditions have since been tending to tighten. The Québec area has been enjoying greater economic growth than the other CMAs, with a 3.1 per-cent increase in its gross domestic product in 2007. This is confirmed by the sustained job creation in 2007 (+9,100) and 20083 (+6,400). Investments in infrastructure and the activities for Québec City’s 400th anniversary effectively stimulated the labour market. In 2008, the non-residential construction has benefited from these conditions with strong gains in employment and hours worked across the area. During the first nine months of the year, 8,100 jobs were created in this sector: accommodation and food services; professional, scientific and technical services; finance, insurance and real estate; as well as transportation and communication. For the first nine months of the year, total employment growth reached 1.7 per cent in the CMA, and the increase extended to both full-time and part-time jobs. However, the rise in demand was not supported by the labour market situation for young people aged from 15 to 24 years, since the employment level was down for the first three quarters of 2008, compared to the same period in 2007. The greater demand was rather due to the increase in migration, fuelled by the good economic performance of the area. In fact, net migration in the CMA reached 4,170 people in 2006 and, even though the figures are not yet known, it is expected that the levels will again be high in 2007 and 2008. Newcomers from other regions across Quebec accounted for the greatest share (62 per cent). This strong migration to the CMA has been significantly boosting demand for rental housing.

Limited rise in rental housing supply

Moishe Alexander says the growth in supply weakened this year. In fact, the increase in the number of rental dwellings in privately initiated buildings reached 467 units in 2008, compared to 684 in 2007 and 771 in 2006.

Vacancy rates fall in most sectors of the CMA

Moishe Alexander says that vacancy rates fell in seven of the nine zones in the area. The rental market remained very tight on the South Shore (zones 8 and 9) and, even though conditions remained practically stable there in 2008, this sector still had the lowest vacancy rate in the CMA, at 0.2 per cent (zone 8). The vacancy rate in zone 9 (Lévis, Pintendre, Saint-Joseph-de- Lévis and Beaumont) eased very slightly in 2008, reaching 0.4 per cent, compared to 0.3 per cent in 2007. The greatest vacancy rate decrease was observed in zone 5 (Val-Bélair, Saint-Émile, Loretteville, etc.), where this rate fell from 1.7 per cent in 2007 to 0.4 per cent in 2008. The presence of the Valcartier military base and the development of Technopole Defence and Security has certainly accounted for the strong housing demand in this sector.

Vacancy rates on the decline in newer structures

Moishe Alexander says in the area, the sustained demand contributed to pushing down the vacancy rate for newer buildings. In 2007, structures built in 2000 or later had higher vacancy rates than older buildings, on account of their higher rents. This was no longer the case in 2008, as the vacancy rate for newer structures was 0.6 per cent. This year, structures built before 1960 had the highest vacancy rate, at 0.9 per cent. Overall, however, the vacancy rate was higher (1 per cent) for units renting for $1,000 or more per month. The strong demand for rental housing also led to a tighter market for smaller apartments, for which conditions are usually less tight. The vacancy rates for bachelor units and one-bedroom apartments fell in 2008, reaching 1.6 per cent and 0.9 per cent, respectively.

Estimated change in average rents

Moishe Alexander says in the CMA, the average rent for two-bedroom apartments rose by 2 per cent between the October 2007 and October 2008 surveys. The increase was below the rate of inflation observed over the same period for Quebec overall (2.3 per cent). It should be noted that CMHC now uses a measure (introduced in 2006) that estimates the change in rents charged in existing structures. This measure therefore excludes the impact of new structures and conversions added to the universe between surveys. In October 2008, the average rent for two-bedroom apartments reached $653 per month. The Québec CMA had the third highest average rent for units of this type, behind Gatineau ($677) and Montréal ($659). In the area, the highest average rent for two-bedroom apartments was observed in the Québec Haute-Ville sector, at $861 per month, while the Beauport sector had the lowest average rent for units of this type, at $587 per month for the period.

Availability rate

Moishe Alexander says the availability rate differs from the vacancy rate in that it includes not only the vacant units but also the units for which the existing tenant has given, or has received, notice to move, and for which a new tenant has not signed a lease. This rate reached 1.2 per cent in October 2008. The highest availability rates were recorded in the Québec Haute-Ville (1.9 per cent) and Basse- Ville (1.8 per cent) sectors and in the zone comprising Beauport, Sainte-Brigitte-de-Laval, Boischatel, L’Ange-Gardien, Château-Richer and L’Île-d’Orléans (1.8 per cent). The lowest availability rate was noted on the South Shore in the sector including Charny, Saint-Romuald and Saint-Jean-Chrysostome (0.2 per cent). These figures show that a small number of units would be vacated in the short term, which also reflects the lease cycle in Quebec, as most are signed for one year and renewed on July 1st.

Rental affordability indicator

Moishe Alexander says the rental affordability indicator is a gauge of how affordable a rental market is for those households which rent within that market. The new 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 income4, 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. In general, as the indicator increases, the market becomes more affordable; as the indicator declines, the market becomes less affordable. According to this indicator, the Québec CMA rental market became more affordable this year than in 2007. In fact, the indicator rose from 126 in 2007 to 135 in 2008. This means that the median income of renter households in the CMA was 35 per cent greater than the minimum required5 to pay the median rent. In 2008, the increase in the median income of renter households (+9 per cent) was greater than the rise in the median rent (+2 per cent).

Market to remain tight

Moishe Alexander says the last time the rental market was relatively less tight dates back to 1998, when the vacancy rate stood at 3.3 per cent. The beginning of the current decade was marked by rates reaching 0.3 per cent and 0.5 per cent. From 2002 to 2006, the market eased but, in 2007, the vacancy rate started another downward trend, reaching 0.6 per cent this past October. The situation will persist in 2009, as traditional rental housing construction has been idling, with volumes remaining well below the levels recorded in the last five years. In addition, the strong migration to the CMA has contributed to maintaining demand for dwellings of this type. Finally, despite favourable mortgage rates, there should be fewer renter households accessing homeownership, as a result of the economic slowdown and the less significant formation of young households in the area.

Secondary Rental Market Survey

Moishe Alexander says for the last two years, CMHC has expanded the Rental Market Survey to include information on rental condominium apartments in the following centres: Vancouver, Calgary, Edmonton, Toronto, Ottawa, Montréal and Québec. In the Québec CMA, the condominium apartment stock comprised 19,092 units in October 2008, compared to 18,526 units at the same time in 2007. The North Centre sector (zones 1 to 4) accounts for most (68 per cent) of these units. In the overall CMA, 8.4 per cent of the condominiums were rental dwellings (1,604 units) in October 2008, for a decrease from October 2007, when there were 1,701 rental condominiums, or 9.2 per cent of the condominium stock. This proportion was smaller on the South Shore, at 6.8 per cent in 2008, compared to 8.6 per cent a year earlier. The vacancy rate in the rental condominium segment followed the same trend as the rate on the traditional rental market. In fact, market conditions tightened, as the overall rental condominium vacancy rate fell to 1.3 per cent in October 2008, compared to 2.4 per cent in October 2007. The vacancy rates for rental condominiums differed from one sector to another in the area. In fact, the rates were 1.7 per cent in the North Centre and 0.6 per cent in the Northern Suburbs, while no rental condominium units were vacant on the South Shore. These results reflect the situation on the overall rental market in the area.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64427/64427_2008_A01.pdf

London, Ontario - Credit abdallahh, Flickr

The London Ontario rental vacancy rate has moved up to 3.9% in 2008 and Canada Mortgage and Housing Corporation is predicting that the vacancy rate will rise to 4.2% in 2009. For a city the size of London Ontario, this means that a tenants market for rental units has returned to the London Ontario area.

It is good times now for tenants in London Ontario to find good rental accommodations at reasonable rents, as line-ups at landlord’s offices is over.

SLIGHT COOLING OFF OF THE LONDON RENTAL MARKET

The London rental market has cooled off slightly and the vacancy rose to 3.9% in 2008 from 3.6% in 2007. The average rent on rental units increased by 1.5% in 2008 form the 2007 rental rate figures, which was slower than the 2.6% increase in 2007, from the 2006 rental period.

The rental vacancy rate increased in the surrounding communities i.e. St. Thomas and Strathroy substantially, which affected the overall vacancy rates. Canada Mortgage and Housing Corporation is predicting that the overall vacancy rate in London will increase to 4.0% for the period ending 2009.

SEVERAL REASONS FOR CONTINUED INCREASE IN VACANCY RATE

The Canada Mortgage and Housing Corporation report states that many factors have combined to increase the vacancy rate in London. Some of those factors include a surprising decrease in university students and huge unemployment increases. As well as the substantial increase in the creation of rental units, which increased to 836 units in 2008, versus 586 in 2007.

CONTINUED MODERATE RENT INCREASES

The Canada Mortgage and Housing Corporation report states that last fall in London Ontario, a one-bedroom apartment that used to rent for $554.00, plus utilities is now renting for $565.00, plus utilities, compared to the same period last year. A two-bedroom unit that rented last year for $625.00, plus utilities, is now renting for $645.00, which is approximately a 1.5% increase.

Government sources say that with these moderate increases, welfare recipients are not hard pressed to rent in London Ontario. Increased vacancy rates in this area of the province have caused rents to increase moderately for the same period last year. However, rent increases in purpose-built apartment rent units that were new, were more significant in most areas of the City of London Ontario.

RENTERS PREFER LARGER AND NEWER BUILDINGS

Canada Mortgage and Housing Corporation report states that apartment buildings with excess of 100 units or more have the lowest average vacancy rate in London Ontario at 2.9%. Rental apartments constructed after 2000 are becoming popular and preferred by the London area tenants, specifically in the downtown core.

LONDON’S RENTAL AFFORDABILITY INDICATOR

Canada Mortgage and Housing Corporation affordability indicator will decline to 119 by year-end 2008, which indicates that the value of 100 suggests that 40% of the median income of rental households is necessary to rent a two bedroom apartment, well above the Canadian average.

NATIONAL VACANCY RATE DECREASED IN OCTOBER 2008

Canada Mortgage and Housing Corporation reports that the vacancy rate in Canada’s 34 major centers decreased to 2.2% from 2.6% in October of 2008, for the same period the year before. Vacancy rates were as high as 14.6% in Windsor to a low of 0.3% in Vancouver and Abbotsford BC.

Canada Mortgage and Housing Corporation reports that the highest average monthly rent for a two bedroom apartment is in Calgary, Alberta with a monthly rental cost of $1,148.00 to a low of $543.00 in Sherbrooke, Quebec.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64403/64403_2008_A01.pdf

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

Brantford, Ontario - Credit tcp909, Flickr

The apartment vacancy rate fell to 3.2 per cent and 2.4 per cent in Hamilton and Brantford, respectively in October 2008 as compared to a year ago. Rents were up 1.3 per cent in Hamilton and 2.7 per cent in Brantford. More would-be buyers postponed their purchases and stayed in the rental market, exerting downward pressure on the vacancy rates. In 2009, the vacancy rate is expected to edge lower to 3.0 per cent and 2.2 percent in Hamilton and Brantford, respectively.

Rental Demand Varied Across Sub-Markets

The average apartment vacancy rate fell to 3.2 per cent this year in the Hamilton CMA but the vacancy rate varied by sub-market. The vacancy rates were higher in the Downtown, East, and Central parts of the former Hamilton City zones as well as Grimsby and Stoney Creek. Conversely, vacancy rates were lower in some of the more expensive markets including Ancaster, Dundas, Flamborough, Glanbrook, and Burlington, providing evidence that the higher quality apartments which are more common in these markets are in higher demand. Burlington’s vacancy rate remains the tightest in the Hamilton CMA at 1.4 per cent. In Brantford, the vacancy edged lower to 2.4 per cent for both apartments and townhouse rentals.

Fewer Full-Time, More Part-Time Jobs

Demand for rental accommodation typically comes from youth households and other households who are not planning to own a home or have not yet saved enough for a down payment. Thus, it is important to take a look at the employment market by specific age groups and types of employment. Given that there are a number of post-secondary institutions in Hamilton, it is reasonable to expect that some of these young students who rent would also hold a part time job to supplement their living expenses. This year, part-time jobs among youth aged 15 to 24 increased 2.4 per cent. At the same time, the labour force for this age group remained relatively unchanged from a year ago. This indicates that more youth are able to find a part time job and thus afford to be in the rental market. At the same time, full-time employment among this age group dropped four per cent, indicating that some young people may have lost their jobs or some were unable to obtain one this year following their post secondary education studies. Consequently, some of these people delayed entering the first time buyer stage and instead chose to stay in the rental market until economic conditions improve. Part-time employment among 25 to 44 year olds also increased this year, and this may be an indication that some of the younger people in this group may have had difficulty securing full-time employment. Younger and thus less experienced workers tend to be more susceptible to changes in the economy such as those that were experienced this year. Full-time employment for this group rose by less than two per cent, yet part-time employment picked up almost 15 per cent as compared to last year. Workers in this group likely picked up a part-time job in order to supplement their income while looking for a fulltime job. Thus, many of these individuals also delayed entering the ownership market and instead chose to continue renting. In Brantford, employment conditions differed from those in Hamilton. Both part-time and full-time employment among youth aged 15 to 24 fell this year, as well as part-time employment for people aged 25 to 44. Slower employment conditions in this city likely kept these people in the rental market. While full-time employment of people aged 25 to 44 increased by 13 per cent as compared to last year, cooler resale market conditions this year indicate that some of these individuals likely stayed in the rental market and put off their home purchases.

Lower Ownership Demand

MLS® sales fell this year from the record level set in 2007 in both Hamilton and Brantford. Greater economic uncertainty prompted many would-be first-time homebuyers to delay their home purchases and instead remain in the rental market this year. Also, according to CMHC’s Renovation and Home Purchase Survey, there were fewer first-time buyers in the market this year. Using the results from the Toronto respondents as a proxy for Hamilton, first-time buyers accounted for 40 per cent of respondents who intend to purchase a home this year, compared with 47 per cent in 2007. In addition, rising home prices last year may have deterred some renters from exiting the rental market where average rent increases are lower than the rate of inflation. This indicates that there were fewer renters looking to buy a home this year as compared to a year ago.

Echo Boomers at Rental Stage

Demographic trends are an important factor of housing demand. The results from the 2006 Census are an indicator of how the population has changed over time and what impact this has on housing demand. For example, larger proportions of a particular age group can determine what type of housing may be demanded and for how long. Currently in Hamilton, there are two specific demographic groups, which are having a greater impact on rental demand – young people and the elderly. Historically, these two groups of households tend to have a higher propensity to rent than other adult age groups, which have a higher propensity to own. The echo boomer generation – the children of baby boomers born in the mid-1980’s to mid-1990’s – have just started to enter the renter stage of the housing demand cycle. Typically, younger households consisting of students or those that have just started their career will tend to rent or stay at home in order to save money before entering into home ownership. This generation of young people is the largest wave of any age group that we have seen since the baby boomer cohort, and is expected to increase housing demand – for both rental and ownership – in the next five to ten years. Also, as people age and enter into retirement, some will choose to rent since many retirees will experience some decline in their disposable income. This ageing population will go through changes in household size with families splitting off and inevitably, some households will consist of one surviving spouse who may require only a small rental apartment. In Hamilton, 15 per cent of the population was above the age of 65 in 2006 and this group is expected to have had some influence on the lower vacancy rate this year.

Fewer Condo Completions in Hamilton

Total condominium apartment and townhouse completions between October 2007 and September 2008 (the period between last year’s and this year’s Rental Market Survey) were just 415 units – 75 per cent of the number of condominium units that were completed during the same period a year ago. Fewer condo completions means that there was less movement out of the rental market into condo ownership. Condominium completions provide a gauge of the movement of households out of the rental market since these less expensive units present renters with the opportunity to make an easier leap into the home ownership market.

Apartment Supply Decreases

Hamilton’s private apartment universe decreased this year to 42,390 units as compared to 42,506 units last year. There were 50 per cent fewer new rental units completed this year as compared to last year, which contributed to the lower number of units in the universe this year.  In Brantford, there were no rental completions and the private apartment universe declined again this year to 4,704 units from 4,808 units in 2007. Fewer units in Brantford also added to the competition among existing rental units.

Drop in Townhouse Vacancy Rates

Rental demand for both apartment and townhouse rentals strengthened this year and the increased demand was most pronounced for two and three bedroom townhouse rentals in Hamilton. The vacancy rate for townhouses in Hamilton fell from 4.3 per cent in 2007 to 1.1 percent this year while the average rent for townhouses increased 3.6 per cent. Average rents for townhouses were generally higher and typically occupied by residents who may have been renting for some time and are preparing for home ownership. Despite higher average rents this year for townhouses, a clear drop in the vacancy rate of townhouse rentals supports the presumption that more would-be first time buyers chose to remain in the rental market where the average monthly rent is still below the average monthly mortgage principal and interest payments. The townhouse vacancy rate was lowest in Burlington at 0.8 per cent. In Brantford, the townhouse vacancy rate was the same as the apartment vacancy rate at 2.4 per cent. The vacancy rate for two bedroom units edged lower to 1.1 per cent while it the survey sample for both the 2007 and 2008 surveys. This measure eliminates the compositional impact of new structures coming on line in the rental market. The methodology section at the end of this report provides more detailed information on this measure. The average increase in rents for all apartments in Hamilton remained unchanged from a year ago at 1.3 per cent. By unit type, the percentage change of average rent was higher for bachelor, one bedroom and two bedroom units, as compared to last year and lower for three bedroom units at 1.4 per cent. The average rent for an apartment in Hamilton is $763 per month. In Brantford, the percentage change of average rent from the common sample was 2.7 per cent, higher than the change from the previous year at 2.1 per cent. The average rent for an apartment in Brantford is $728 per month.

Lower Rents and Higher Vacancy Rates in Central and Central East

The average rents for private apartments in the Hamilton CMA also varied across the various zones. Average rents for private apartments in the Central and Central East areas remain below the average for the Hamilton City zones. Lower rents in these areas as compared to other parts of the Hamilton CMA, combined with higher than average vacancy rates signifies that the rental units in these areas are less desirable moved higher to 2.9 per cent for three bedroom units. This is likely the result of the stronger increase in growth rate of the average rent for a three-bedroom townhouse unit as compared to the average three-bedroom apartment unit.

Availability Rate

Another measure of rental market supply is the availability rate. The availability rate 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. The availability rate for private apartment rentals in both Hamilton and Brantford fell this year to 4.9 per cent and 2.8 per cent, respectively. In Hamilton, the availability rate fell in every sub-market except for Central East, where there was no change at 7.8 per cent – the highest availability rate in all of Hamilton. In accordance with the trend in the vacancy rate, there was less availability of rental supply in some of the more expensive markets of Burlington, Ancaster, Dundas, Flamborough and Glanbrook. Another correlation with the vacancy rate was the increase in the availability of three bedroom rentals this year as compared to last year.

Average Rent Increase Remains Lower Than Inflation Rate

The measure in the growth rate of rents is strictly based on a sample of structures which were common to than some of the other areas where the vacancy rates are lower yet average rents remain elevated. These areas consist of older rental units, which may be less attractive given the choices available in some more recently developed areas of Hamilton. The West End and Hamilton Mountain benefit from a steady stream of students from the post-secondary institutions in the area and thus average rents for three-bedroom units and larger tend to be higher to account for the shared rental costs. The vacancy rates in these areas are also lower than the average for the Hamilton CMA. Few rental properties and a low vacancy rate in the zone covering Ancaster, Dundas, Flamborough and Glanbrook suggest that there may be limited choices for renters looking to live in these areas. The higher rents charged in these areas and low availability rate indicates that these are desirable areas to rent. Burlington is a community that continues to attract many renters and homeowners alike because of its prime location with easy access to other parts of the Hamilton CMA as well as the Greater Toronto Area. Many of the rental units in Burlington are newer structures and there is a range of unit types for rent including executive condominium apartments and townhouses with views of the waterfront, to other freehold townhouses and single-detached homes. The average rent increase in Burlington for structures common to both the 2007 and 2008 survey was 2.1 per cent – the highest increase in the Hamilton CMA. 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 then 30per 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 affordability indicator, affordability in Hamilton’s rental market increased as compared to last year. The cost of renting a median priced two-bedroom apartment climbed 1.9 per cent in 2008, while the median income of renter households grew at 3.6 per cent. The rental affordability indicator in Hamilton stands at 115, the highest affordability level seen yet in Hamilton

Rental Affordability Indicator

The rental affordability indicator is a gauge of how affordable a rental market is for those households, which rent within that market. A generally accepted rule of thumb for affordability is that a household should spend less than 30 per cent of its gross income on housing. The new 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 over the past 12 years. The increased affordability of renting in Hamilton likely attracted and retained many households in the rental market this year. The affordability indicator is not available for Brantford due to a lack of required data for that centre.

Rental Market Outlook

Apartment vacancy rates will decrease further in 2009 to 3.0 and 2.2 per cent in Hamilton and Brantford, respectively. The average two-bedroom apartment rent will rise by 1.5 per cent in Hamilton and 2.5 per cent in Brantford. Rental demand will grow as the echo boomer generation moves fully into their prime rental years. This cohort is expected to have an impact on rental demand over the next five to six years. Slower resale market conditions and greater economic uncertainty expected for 2009 in both Hamilton and Brantford means fewer first-time buyers will purchase a home next year and will instead choose to stay in the rental market. Although interested buyers will have more choice in the market in 2009 with listings up, many households will be less inclined to make big-ticket purchases. Also, the rental market provides greater financial flexibility for households concerned about their economic stability, especially since rental affordability is currently at its highest level in Hamilton. 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 Saskatoon (20.3 per cent), Regina (13.5 per cent), Edmonton (9.2 per cent), and Kelowna (8.4 per cent). Overall, the average rent for two-bedroom apartments in existing structures across Canada’s 34 major centres increased by 2.9 per cent between October 2007 and October 2008. CMHC’s October 2008 Rental Market Survey also covers condominium apartments offered for rent in Calgary, Edmonton, Montréal, Ottawa, Québec, Regina, Saskatoon, Toronto, Vancouver, and Victoria. In 2008, vacancy rates for rental condominium apartments were below one per cent in four of the 10 centres surveyed. Rental condominium vacancy rates were the lowest in Regina, Toronto, Ottawa, and Vancouver. However, Calgary and Edmonton registered the highest vacancy rates for condominium apartments at 4.0 per cent and 3.4 per cent in 2008, respectively. The survey showed that vacancy rates for rental condominium apartments in 2008 were lower than vacancy rates in the conventional rental market in Ottawa, Regina, Saskatoon, and Toronto. The highest average monthly rents for two-bedroom condominium apartments were in Toronto ($1,625), Vancouver ($1,507), and Calgary ($1,293). All surveyed centres posted average monthly rents for two-bedroom condominium apartments that were higher than average The average rental apartment vacancy rate in Canada’s 34 major centres1 decreased to 2.2 per cent in October 2008 from 2.6 per cent in October 2007. The centres with the highest vacancy rates in 2008 were Windsor (14.6 per cent), St. Catharines-Niagara (4.3 per cent), and Oshawa (4.2 percent). On the other hand, the major urban centres with the lowest vacancy rates were Kelowna (0.3 per cent), Victoria (0.5 per cent), Vancouver (0.5 per cent), and Regina (0.5 per cent). Demand for rental housing in Canada increased due to high migration levels, youth employment growth, and the large gap between the cost of homeownership and renting. Rental construction and competition from the condominium market were not enough to offset growing rental demand. The highest average monthly rents for two-bedroom apartments in new and existing structures were in Calgary ($1,148), Vancouver ($1,123), Toronto ($1,095), and Edmonton ($1,034), followed by Ottawa ($995), Kelowna ($967), and Victoria ($965). The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Trois- Rivières ($505), Saguenay ($518), and Sherbrooke ($543). 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.

National Vacancy Rate Decreased in October 2008

The average rental apartment vacancy rate in Canada’s 34 major centres1 decreased to 2.2 per cent in October 2008 from 2.6 per cent in October 2007. The centres with the highest vacancy rates in 2008 were Windsor (14.6 per cent), St. Catharines-Niagara (4.3 per cent), and Oshawa (4.2 percent). On the other hand, the major urban centres with the lowest vacancy rates were Kelowna (0.3 per cent), Victoria (0.5 per cent), Vancouver (0.5per cent), and Regina (0.5 percent). Demand for rental housing in Canada increased due to high migration levels, youth employment growth, and the large gap between the cost of homeownership and renting. Rental construction and competition from the condominium market were not enough to offset growing rental demand. The highest average monthly rents for two-bedroom apartments in new and existing structures were in Calgary ($1,148), Vancouver ($1,123), Toronto ($1,095), and Edmonton ($1,034), followed by Ottawa ($995), Kelowna ($967), and Victoria ($965). The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Trois-Rivières ($505), Saguenay ($518), and Sherbrooke ($543). 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 Saskatoon (20.3 per cent), Regina (13.5 per cent), Edmonton (9.2 per cent), and Kelowna (8.4 per cent). Overall, the average rent for two-bedroom apartments in existing structures across Canada’s 34 major centres increased by 2.9 percent between October 2007 and October 2008. CMHC’s October 2008 Rental Market Survey also covers condominium apartments offered for rent in Calgary, Edmonton, Montréal, Ottawa, Québec, Regina, Saskatoon, Toronto, Vancouver, and Victoria. In 2008, vacancy rates for rental condominium apartments were below one per cent in four of the 10 centres surveyed. Rental condominium vacancy rates were the lowest in Regina, Toronto, Ottawa, and Vancouver. However, Calgary and Edmonton registered the highest vacancy rates for condominium apartments at 4.0 per cent and 3.4 per cent in 2008, respectively. The survey showed that vacancy rates for rental condominium apartments in 2008 were lower than vacancy rates in the conventional rental market in Ottawa, Regina, Saskatoon, and Toronto. The highest average monthly rents for two-bedroom condominium apartments were in Toronto ($1,625), Vancouver ($1,507), and Calgary ($1,293). 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 2008.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/65780/65780_2008_A01.pdf

The Edmonton Alberta rental market is experiencing vacancy rate increases. In fact, the rental vacancy rate has increased substantially from 1.5% in 2007 to 2.4% in 2008.

It is tougher times for landlords in Edmonton Alberta to rent their units.

APARTMENT VACANCIES MOVE HIGHER IN 2008

Edmonton, Alberta - Credit Lana, Flickr

The Canada Mortgage and Housing Corporation reported that the Edmonton Alberta area is experiencing an increased amount of vacancies in rental housing in all sectors. Much of this is attributed to migration out of the province of Alberta, which has seen over 1600 families leave the Edmonton Alberta area in 2008. CMHC attributes some of this up-turn in the vacancy rate to competition from secondary rental market of the units, and investor owned condominium apartment increases in 2008.

INCREASED SUPPLY OF PURPOSE-BUILT RENTAL UNITS

According to Canada Mortgage and Housing Corporation, private homeowners and investors in Edmonton Alberta have increased the rental housing stock by 21% for the first 10 months of 2008. This is caused a surplus of rental housing stock in the Edmonton Alberta area.

SECONDARY RENTAL MARKET IS BECOMING INCREASINGLY IMPORTANT TO THE HOMEOWNER TO SUPPLEMENT THEIR INCOME DURING THIS WORLD ECONOMIC CRISIS

The Canada Mortgage and Housing Corporation report states that since there is a migration problem in Edmonton, and the unemployment rate is up 3.4%, a strong demand has occurred for rental units to be created by home owners, which is called the “secondary rental market”. Pressure is being excreted on the local municipality cities to relax their zoning and building codes to permit additional secondary rental units in private homes.

APARTMENT RENT INCREASES MODERATE IN 2008

The Canada Mortgage and Housing Corporation report states that last fall in Edmonton Alberta, a one-bedroom apartment that used to rent for $764.00 is now renting for $783.00 compared to the same period last year. A two-bedroom unit that rented last year for $744.00 are now renting for $762.00, which is approximately 25% increases.

Government sources say that with this increase cost, welfare recipients are hard pressed to rent anything in Edmonton Alberta.

INCENTIVES RETURN AS VACANCIES INCREASE

Canada Mortgage and Housing Corporation report that in 2007, and then in 2008, landlords have started offering tenants incentives for the first time in 15 years to rent apartments. Incentives often include benefits such as one-month free rent, or 2-year leases (with fixed rental payments), extra appliances, free cable TV, or free parking and or high-speed Internet.

RENTAL AFFORDABILITY INDICATOR

Canada Mortgage and Housing Corporation affordability indicator indicates that the value of 100 suggests that 30% of the median income of rental households is necessary to rent a two bedroom apartment, well above the Canadian average.

NATIONAL VACANCY RATE DECREASED IN OCTOBER 2008

Canada Mortgage and Housing Corporation reports that the vacancy rate in Canada’s 34 major centers decreased to 2.2% from 2.6% in October of 2008, for the same period the year before. Vacancy rates were as high as 14.6% in Windsor to a low of 0.3% in Kelowna BC.

Canada Mortgage and Housing Corporation reports that the highest average monthly rent for a two bedroom apartment is in Calgary, Alberta with a monthly rental cost of $1,148.00 to a low of $543.00 in Sherbrooke, Quebec.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64379/64379_2008_A01.pdf