Posts Tagged ‘year’

Posted by Moshe Alexander

The vacancy rate among apartments with at least three units (3+) in the Thunder Bay Census Metropolitan Area (CMA) inched up to 2.3 per cent in October 2009, from 2.2 per cent last year, according to Rental Market Survey (RMS) data released in December by Canada Mortgage and Housing Corporation (CMHC). (See Table 1.1.1) With the October vacancy rate’s slight increase, Thunder Bay now becomes the CMA with the tenth lowest vacancy rate for 33 centres with populations over 100,000 in Canada. Northern Ontario’s other major centre, Sudbury saw its rate rise to 2.9 per cent from 0.7 per cent last year. Meanwhile, elsewhere in Northwestern Ontario, Kenora’s vacancy rate declined to 0.8 per cent from 1.7 per cent in October 2008.

The vacancy rate in Thunder Bay was up only slightly this year as several opposing forces came into play. Improvement in homeownership affordability caused by falling interest rates has encouraged some renters to become homeowners. Low ownership costs in Thunder Bay combined with rising apartment rents reduced the relative cost of homeownership – dampening demand for rental accommodation. There are other factors that have added to rental demand and exerted downward pressure on vacancy rates. Although there has been a long-term out-migration amongst the 18 to 24 renter aged group, important trends emerged recently. Employment in the service sector and 18-24 age groups have held up reasonably well, possibly exerting slight upward pressure on rental demand, as young adults are more likely to rent rather than own. Overall, employment has fallen 5.5 per cent over the past year between the 2008 and 2009 surveys. However, the brunt of the job losses has been in the goods-producing sector and the 25-44 age group, arguably sectors not directly associated with rental demand. Next, demand coming from students in post-secondary institutions has increased rental demand. Enrolment in post-secondary institutions has been growing in Thunder Bay. Less space in student housing has caused spillover in the private market creating demand for units located in proximity to Lakehead University and Confederation College. Laid off workers returning to school as mature students are creating additional demand for private rentals. In addition, recent data has indicated no new sources of rental supply. Going back to 1998, there have been few rental completions added to the supply of rental units in Thunder Bay.

The availability rate1 is a slightly broader measure of what landlords have available to market to prospective tenants. The availability rate refers to the percentage of apartments that are either vacant or for which the existing tenant has given or received notice to move. Once again, availability rates moved in the same direction as the vacancy rate in Thunder Bay. Thunder Bay’s availability rate rose to 3.1 per cent from 2.7 per cent in 2008. Only one of the 15 metropolitan areas in Ontario had a lower availability rate than Thunder Bay, namely Kingston (2.5 per cent). Higher availability rates are a result of higher turnover. (See Table 1.4.)

Posted by Moshe Alexander

A number of factors have exerted upward pressure on Sudbury’s vacancy rate. Between October 2008 and October 2009, employment in the mining and related service sector has fallen. The challenges facing global demand for stainless steel have impacted Sudbury’s nickel industry and services related specifically to this sector. While the latest migration results (2007-2008) for Sudbury CMA showed positive net in-migration for the sixth consecutive year, it is more likely that in-migration slowed as well since last fall due to less investment spending in the mining industry. Some of these residents affected by the changing fortunes of the nickel market, may have left Sudbury to find work causing the vacancy rate to rise if they resided in rental housing. Meanwhile, a slowing job market triggered less renter household formation, particularly among the core renter group of young adults aged 18-24, resulting in more young adults remaining in the parental home.

Another factor dampening rental demand has been the shift to homeownership. An improvement of homeownership affordability caused by falling interest rates has prompted some renters to become homeowners over the past year. Although overall sales are lower, affordable priced product is moving well suggesting first time buyers are active.

With the total stock increasing only marginally over the course of the year, changes in the vacancy rate are attributable to changes in rental market demand, rather than fluctuations in supply. There is only a slight change in the rental universe observed between October 2008 and 2009 underlining the lack of new supply or changes to the stock of rental units (See Table 1.1.3). There have been only 58 rental completions in the last ten years according to CMHC’s survey in Greater Sudbury, with 31 coming last year. While the overall vacancy rate climbed to 2.9 per cent, both one bedroom and two bedroom units saw vacancy rates rise by a similar magnitude. Sudbury’s one bedroom stock saw its vacancy rate rise to 2.8 cent from 0.9 per cent while the two bed apartment stock jumped to 2.5 per cent compared to 0.4 per cent last year. Units in direct competition with homeownership saw an increase in vacancy rates as young couples and/or unattached singles move from rental units into homeownership or leave the community altogether.

Posted by Moshe Alexander

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 historical averages. According to the CMHC’s Fall 2009 Rental Market Survey, the vacancy rate edged up to 4.4 per cent in 2009. This was above the 20-year average level of 3.5 per cent, and an increase of 0.1 percentage point from last year. Four main factors placed upward pressure on the vacancy rate. First, record low mortgage rates in combination with lower prices in the earlier part of the year translated into very affordable mortgage carrying costs. Many buyers, in particular first- time buyers, took advantage and moved out of rental accommodation and into home ownership. A comparison of average rents and mortgage carrying costs based on the mortgage terms chosen by most first-time buyers (i.e., maximum amortization period and the minimum down payment allowed) suggests that the gap between the two narrowed by more than 50 per cent in the first quarter of 2009.

Also, youth aged 15 to 24 are a key source of rental demand. Weaker employment among youth in this age group meant that some of them, after losing their jobs, moved back into their parents’ homes, or alternatively, postponed a decision to move out. Total employment for all age groups declined by around 11,000 people or 5.6 per cent when comparing the average level in the 12 months ending September 2009 to average level in the same period a year earlier.Youth employment declined by 4,500 people or 14 per cent, of which 2,900 in full- time positions and the rest in part- time jobs.

Finally, there were fewer international immigrants in 2009, due to the global economic slowdown. Since they traditionally tend to rent after landing in Canada, this implies that rental demand in 2009 was not as strong as in the previous years. Many international migrants find it difficult to settle in the region and land a job. Instead, they prefer to settle in major centres, such as the Greater Toronto Area, where they are more likely to find their first job and where there are established social networks.