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Charlottetown CA

Comments: 0January 4th, 2010 by admin

Posted by Moshe Alexander

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.

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Posted in CMHC, Canada, affordable housing

Moishe Alexander’s review of the St. Catharines – Niagara CMA Rental Market and CMHC Outlook Report

Comments: 0February 18th, 2009 by admin

February 3, 2009 — Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting the St. Catharines – Niagara CMA Rental Market

Moishe Alexander’s Review

Niagara Falls, Ontario - Credit Flickr Creative Commons

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

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Posted in Alberta, British Columbia, CMHC, Housing Market, Manitoba, Newfoundland, Ontario, Quebec, Rental Market, Uncategorized

Moishe Alexander’s review of the Quebec CMA Rental Market and CMHC Outlook Report fall 2008

Comments: 0February 18th, 2009 by admin

February 8, 2009 – Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting the Quebec CMA Rental Market

Moishe Alexander’s Review

Highlights

Quebec City - Credit David Paul Ohmer, Flickr

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

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Posted in Alberta, British Columbia, CMHC, Housing Market, Manitoba, Newfoundland, Ontario, Quebec, Rental Market, Uncategorized

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