National rental vacancy rate inches down to 2.6 per cent
The average rental apartment vacancy rate
in Canada’s 28 major centres(1) decreased slightly by 0.1 of a percentage
point to 2.6 per cent in October 2006 compared to last year, according to the
Rental Market Survey released today by Canada Mortgage and Housing Corporation
(CMHC).
“Solid job creation and healthy income gains helped to strengthen demand
for both ownership and rental housing,” said Bob Dugan, Chief Economist at
CMHC’s Market Analysis Centre. “High levels of immigration were a key driver
of rental demand in 2006, as was the increasing gap between the cost of home
ownership and renting. These factors have put downward pressure on vacancy
rates over the past year.”
“However near record levels of existing home sales and the high level of
housing starts in 2006 show that home ownership demand remained very strong,
and it continues to apply upward pressure on vacancy rates”. Adding to this is
the high level of condominium completions in some centres. Condominiums are a
relatively inexpensive type of housing for renters moving to home ownership.
Also, some condominium apartments are owned by investors who rent them out.
Therefore, high levels of condominium completions have created competition for
the rental market and have put upward pressure on vacancy rates.
The centres with the highest vacancy rates in 2006 were Windsor
(10.4 per cent), Saint John (NB) (6.8 per cent), and St. John’s (NFLD)
(5.1 per cent). On the other hand, the major urban centres with the lowest
vacancy rates were Calgary (0.5 per cent), Victoria (0.5 per cent), and
Vancouver (0.7 per cent).
In British Columbia, vacancy rates declined in Vancouver (down 0.7 of a
percentage point to 0.7 per cent) and Abbotsford (down 1.8 percentage points
to 2.0 per cent) between October 2005 and October 2006, but were unchanged in
Victoria (0.5 per cent). The rapid growth of British Columbia’s population and
the higher cost of homeownership continue to fuel strong rental demand. For a
third year, Victoria remains one of the tightest metropolitan rental markets
in Canada.
In the Prairies, vacancy rates were down in four of the five metropolitan
areas. Very high net migration to the region and a significant jump in
mortgage carrying costs due to higher home prices put downward pressure on
vacancy rates. Edmonton’s vacancy rate decreased by 3.3 percentage points to
1.2 per cent between October 2005 and October 2006 - the sharpest drop among
Canada’s major centres. Vacancy rates decreased to 3.2 per cent in Saskatoon
(down 1.4 percentage points) and to 0.5 per cent in Calgary (down
1.1 percentage points).
In Ontario, vacancy rates were lower in five of 11 major centres and
unchanged in two. The rising cost of homeownership, high immigration, and
improved job prospects for youth were largely responsible for boosting rental
demand across the province. These factors helped offset upward pressures on
vacancies triggered by higher condominium and rental apartment completions.
The vacancy rate in Ottawa decreased by one percentage point to 2.3 per cent,
while in Toronto the vacancy rate declined 0.5 of a percentage point to
3.2 per cent.
Vacancy rates went up in three of Quebec’s six major centres and remained
unchanged in one. Low mortgage carrying costs continued to draw renter
households toward homeownership. This, combined with weak job opportunities
for youths, held back growth in rental demand. Completions of rental units
targeting seniors also helped boost vacancy rates in some Quebec centres.
Gatineau’s vacancy rate increased from 3.1 per cent in October 2005 to
4.2 per cent in October 2006, while the vacancy rate in Montréal increased by
0.7 of a percentage point to 2.7 per cent over this period. Québec saw a
modest 0.1 percentage point increase in its vacancy rate to 1.5 per cent.
In the Atlantic region, vacancy rates increased in both St. John’s (NFLD)
(up 0.6 of a percentage point to 5.1 per cent) and Saint John (NB) (up
1.1 percentage points to 6.8 per cent). The vacancy rate in Halifax edged down
by 0.1 of a percentage point to 3.2 per cent. Slower employment growth,
out-migration, and low mortgage carrying costs have weakened demand for rental
housing and put upward pressure on vacancy rates in Atlantic Canada.
The highest average monthly rents for two-bedroom apartments in new and
existing structures were in Toronto ($1,067) and Vancouver ($1,045), followed
by Calgary ($960) and Ottawa ($941). The lowest average monthly rents for
two-bedroom apartments in new and existing structures were in Trois-Rivières
($488) and Saguenay ($485).
By excluding the impact of new structures built since the last survey and
conversions from the calculation, we can get a better indication of the rent
increase in existing structures. The greatest rent increases occurred in
markets where vacancy rates were lowest in 2006. Rents in existing structures
were up 19.5 per cent in Calgary, 9.9 per cent in Edmonton, 5.1 per cent in
Greater Sudbury and 4.4 per cent in Vancouver. Overall, the average rent for
two-bedroom apartments in existing structures across Canada’s 28 major centres
increased by 3.2 per cent between October 2005 and October 2006. Excluding
Calgary and Edmonton, the average rent for two-bedroom apartments in existing
structures was up only 2.4 per cent in 2006 compared to 2005.
With the release of its 2006 Rental Market Survey, CMHC has broadened its
coverage of the rental market to include apartment condominiums offered for
rent in the following centres: Vancouver, Calgary, Edmonton, Toronto, Ottawa,
Montréal, and Québec. In 2006, vacancy rates for rental condominium apartments
were at or below one per cent in five of the seven centres surveyed. Rental
condominiums in Vancouver and Toronto had the lowest vacancy rate at 0.4 per
cent. On the other hand, Québec and Montréal registered the highest vacancy
rates for condominium apartments at 1.2 per cent and 2.8 per cent in 2006,
respectively. The survey showed that vacancy rates for rental condominium
apartments in 2006 were lower than vacancy rates in the conventional rental
market in all the surveyed centres, except Montréal and Calgary. The highest
average monthly rents for two-bedroom condominium apartments were in Toronto
($1,487), Vancouver ($1,273), and Calgary ($1,257). 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 2006.
In Toronto, Montreal, and Vancouver, the scope of CMHC’s Rental Market
Survey was further extended to gather information on monthly rents in dwelling
types(2) other than private apartments and condominium apartments such as
duplexes and accessory apartments. The results showed that the average monthly
rent for a two-bedroom unit in the secondary rental market was lower than the
average rent in both the conventional and condominium apartment markets in
Montréal and Vancouver. In Toronto, the average monthly rent for a two-bedroom
unit in the secondary rental market was slightly higher than in the
conventional rental market.
Starting in 2007, CMHC will be conducting a rental market survey in the
spring, in addition to the one conducted in the fall. The results of the
spring survey will be published in June and will provide centre-level
information on key rental market indicators such as vacancy rates and average
rents.