Calgary vacancy rates quadruple from last year: CMHC
Calgary’s once-cramped rental market has space to spare, and it could have implications for the city’s new and resale home sectors.
In its recent fall rental survey, Canada Mortgage and Housing Corporation’s (CMHC) reported vacancy rates in Calgary’s rental sector has nearly quadrupled over the previous year, jumping to 5.3 per cent in October from 1.4 per cent at the same time last year.
“The call volume has dropped off considerably in the last 12 months,” said Mainstreet Equity Corp. CEO Bob Dhillon, whose Calgary-based real estate company owns and operates rental properties in the Calgary area, as well as in British Columbia and Saskatchewan.
Dhillion points to an influx of new condominium projects as a contributor to rising vacancy rates in the city.
“The supply chain from the boom days when people started building condos and houses – they’ve all come on-stream during a slow period,” he said. “That’s created a little bit of an overhang in the market when a lot of (those) unsold condos hit the rental market.”
CMHC analyst Richard Cho also credits the province’s beleaguered energy sector for improved vacancy rates.
“Considering how the economy in Calgary has changed and how much the price for oil has declined from 2014, it does not come as a big surprise to see the vacancy rate move up,” he said. “Slower migration and job losses in a number of different sectors have impacted rental demand.”
Despite improved Calgary’s vacancy rate, rents have yet to show a corresponding decline. In fact, according to CMHC, the average rent for a two-bedroom apartment in the city increased compared to last year, jumping $10 to $1,332 and placing Calgary behind only Vancouver ($1,360) as the most expensive market in the country.
Although average rents in the city have yet to fall, a continuing lack of demand in the sector could bring future decreases, suggests CREB® chief economist Ann-Marie Lurie.
“It’s really about that vacancy number,” she said. “The fact that the vacancy number has risen, that will at some point put downward pressure on rents.”
Rentfaster.ca, which reports on the Calgary and Edmonton markets, showed the number of local apartments up for grabs stood at 1,203 as of Nov. 2, with an average monthly rent of $1,369. There were 1,628 condos available with an average rent of $1,889, while 1,291 detached homes were listed with an average rent of $1,889.
With many renters tied into year-long lease agreements, Lurie said any price corrections in the rental market could take time to show up in the statistics. What’s more certain is the impact of a relatively relaxed rental market on the number of homes changing hands in the city and the willingness of would-be buyers to remain on the fence.
“When there is more rental availability, people aren’t being pushed as much into ownership,” she said. “They’re not facing higher rents and they’ve got lots of choice. And with the market the way it is, they don’t have to make that decision to move into ownership.”
Echoing Lurie’s comments, Cho agreed the current market isn’t the same one that greeted renters and buyers over the last two years.
“There is not the same pressure to move out of the rental market to home ownership when vacancy rates were around one per cent and rents were rising,” he said. “Demand for home ownership coming from those in the rental market has moderated compared to previous years.”
While rents have yet to decline, home prices in the city have done just that. According to CREB®’s recent monthly report, benchmark prices in Calgary fell by 0.7 per cent month-over-month to $453,100 in October.
Lurie singled out the apartment sector, where benchmark prices fell to $288,300, a 0.8 per cent decline from September and nearly four per cent from the same time last year.
“When you’re looking at the resale market, what will influence it is supply – so how much product is available,” she said. “What we’re seeing is those inventory numbers are remaining elevated. With more inventory and less demand, pricing is being impacted.”