Economic conditions create ideal situation for renters, challenges for landlords
In the most volatile economy in the country, it is no big surprise Calgary landlords endured 2016 with the highest rental housing vacancy rate in a quarter of a century.
“It is a free market economy, with all the ups and downs, and in the middle of (this downturn), you just hope many will survive it,” said Gerry Baxter, executive director of the Calgary Residential Rental Association (CRRA) of Calgary’s current seven per cent vacancy rate.
That rate, which rose for the third straight year, has been good news for renters, with everything from average rent decreases of 7.6 per cent over last year (to an average $1,143 a month) to increased choice of new buildings with enhanced amenities.
Renters’ conditions are expected to continue through 2017, said Richard Cho, Calgary-based principal market analyst for Canada Mortgage Housing Corporation (CMHC), which released its annual rental market assessment last month.
“We don’t anticipate any change in the vacancy rate for the next 12 months.”
The report, which surveys the market each October, said Calgary’s seven per cent rental vacancy rate compares to 5.3 per cent a year ago and 1.4 per cent in fall 2014.
“Although we anticipate the economy will gradually improve next year, there will continue to be more supply brought to the market, and we don’t anticipate any change in the vacancy rate for the next 12 months,” said Cho.
Calgary’s rate was one of the highest in CMHC’s comparison of large urban centres. Only Edmonton (7.1 per cent), Saskatoon (10.3 per cent), St. John’s, N.L. (7.9 per cent) and Saint John, N.B. (8.5) showed larger vacancies. The average large municipality vacancy rate was 3.4 per cent, compared to 3.3 per cent rate in 2015. Vancouver and Victoria were at less than one per cent.
Calgary’s numbers are being driven not only by an economy that has seen renters leave the province altogether, but also by a continuing supply of both new purpose-built rental buildings (which ramped up three years ago) and new investor-owned condo units put on the rental market.
Calgary now has 36,523 purpose-built units, an increase of 1,296 over the same time last year. Another 1,262 investor-owned condos came on the rental market (for a total of 18,172 units).
“We hear from tenants that they can’t afford the rents and have to move – many leaving the province altogether.”
About 30 per cent of purchased condos enter the rental pool.
Baxter, whose group represents owners from small investors to large companies, said today’s rental market is similar to 2009’s downturn.
“What is different is this is much deeper and more severe. We hear from tenants that they can’t afford the rents and have to move – many leaving the province altogether,” he said.
Baxter added the biggest decrease in demand is in apartments charging $1,500/month and higher.
“That market is not there,” he said.
Increased supply and decreased demand means landlords who can do suite upgrades should in preparation for that improved economy, said Baxter.
And while large rental companies can probably absorb the vacancy hike it, he said it may be the “mom and pop” operations who, if they can’t rent, still must pay the mortgage. And that may mean selling and getting out of the business.”