March, 2006
CMHC Vacancy and Rental Rate Survey Results
Dramatic Drop in Vacancies Suggests Positive Outlook
According to the December 2005 Canada Mortgage and Housing Corporation (CMHC) Rental Market Report, vacancies have fallen dramatically, from 4.3% in 2004 to just 1.6% - the lowest level since 2001. The current inventory of rental apartments has once again decreased, from 42,335 units recorded in 2004, to 41,416 at the end of 2005. In real numbers, there were just 616 vacant apartment suites available in Calgary at December 2005, compared to 1,808 a year earlier. According to CMHC, had the number of units not declined, the vacancy rate would have been 3.7%. Of note, the total number of rental suites has decreased in nine of the last ten years. Most surprising, 2004 - labeled an anomaly by CMHC - saw migration of only 2,253 people to Calgary, compared to over 13,600 new residents in 2005.
The highest vacancies were recorded in three bedrooms at 3.5%, followed by bachelor units at 2.0% (down from 5.7% last year). Two bedroom vacancies were recorded at 1.6% (down from 5.2% last year), and one-bedrooms were at a low 1.4%, down 200 basis points from 3.4% in December 2004.
Geographically the highest vacancies were recorded in the Southeast at 2.8% - still, a dramatic recovery from the 10.5% vacancy recorded in this region last year. The two areas with the lowest vacancies - North Hill and Fish Creek, both at just 0.7% - fell dramatically from 3.4% and 4.8% respectively. The Beltline also saw a significant decrease in vacancy, from 4.1% in 2004, to 1.6% in 2005; similarly in the Southwest, where vacancies fell from 6.1% in 2004 to 2.3% in 2005, and in the Chinook area, where vacancy more or less halved from 3.1% to 1.5%.
Meanwhile, rents remained relatively unchanged, showing less than 1% average growth; the Beltline saw the highest average increases, of about 3%, while both the North Hill and Southwest areas saw decreases in average rental rates. Rents by unit type averaged $524 for bachelors (up from $515 in 2004); $666 for one bedrooms (up from $655 in 2004) and $808 for two bedrooms, up only $2 from the previous year. The overall average rent for all suite types was $723, up from $716 in 2004 – once again, reflecting little change to rents over the previous three years.
One-bedroom rents were once again the highest in the southwest-suburban Fish Creek area at $733 (from $720 in 2004), and then downtown at $683 (down from $688 last year). The lowest one-bedroom rents were recorded on the North Hill ($620, from $618 in 2004) and in the Southwest ($637). Of note, one bedroom rents in the Southeast increased from $628 in 2004 to $670 in 2005. Two-bedroom rents were again the highest downtown, at $877 per month, but down from $886 in 2004, while the lowest were in the Southeast at $704, followed by the North Hill at $730 ($687 and $754 respectively in 2004). Both the Beltine and Fish Creek areas were in the range of $850 per month, while the Southwest, Northwest, Northeast and Chinook areas approached $800 per month.
CMHC predicts that rents will increase in 2006, for the first time in four years, although moderately – approximately $16 for two bedrooms, and about 2% overall. At the same time, the need for incentives to entice tenants appears to be over. CMHC zones are defined as Downtown; the Beltline (including Bankview and Sunalta); the North Hill (16th Avenue to the North, between Deerfoot and 37th Street NW); Southwest (south of the Bow River to the Glenmore Reservoir, and west of the Elbow River, excluding Downtown and Beltline zones); Southeast (east of Blackfoot and South of Memorial Drive); Northwest (west of Deerfoot, north of 16th Avenue and the Bow River line); Northeast (east of Deerfoot, north of Memorial Drive); Chinook (south of Mount Royal, east of the Elbow River, west from Blackfoot, and north from Heritage Drive); and Fish Creek (south of Heritage Drive and west of Blackfoot Trail, to the south city limit).
Nationally, Calgary’s overall vacancy rate of 1.6% was sixth lowest in the country (of 28 areas surveyed), compared to being tied with Toronto for 21st place or seventh highest in 2004. The greatest vacancy rate was once again found in Windsor, at 10.3% and up from 8.8% in 2004. The next highest was Saint John at 5.7%, followed by Edmonton, St. John’s, Hamilton, Saguenay, Saskatoon and Thunder Bay, all in the range of 4.5%. The lowest vacancies were found in Victoria at 0.5%, followed by Sherbrooke at 1.2%, and Quebec City and Vancouver at 1.4%. Last year, 21 of Canada’s 28 areas surveyed saw vacancy increases; this year more than one-half (15) saw vacancies decrease. Interestingly, the overall national average remained unchanged from 2004’s 2.7%.
As was the case in 2004, Toronto, Vancouver and Ottawa once again recorded the highest average two-bedroom rental rates - Toronto unchanged at $1,052, Vancouver at $1,004 from $984 in 2004, and Ottawa at $920 in 2005, a decrease from $940 in 2004. In 25 of 28 areas surveyed two bedroom rates increased; the greatest increases were at 6% in Kitchener, 4.8% in Victoria, and 4.2% in Quebec City (the latter two among the lowest in vacancy). Trois-Rivieres and Saguenay were once again the least expensive places to rent in Canada, where two bedrooms averaged $474 and $472 respectively, up from the mid $450’s in 2004.
The average price of a condominium only a few years ago was $160,000; this number is now more in the range of $215,000. CMHC suggests that what once was a premium cost to ownership of $250 per month could be as much as $500 per month in 2006, which along with increasing interest rates will almost certainly cause more tenants to remain in rental accommodation. This eroding affordability factor, combined with strong job growth, anticipated migration in the range of 15,000 new residents, and a rental inventory that continues to decline all bode well for a positive outlook for Calgary’s rental market.
Compiled by Tim Sommer, Investment Property Specialist with Cushman & Wakefield LePage of Calgary. For further information, contact Tim at 403.261.1188 or tim.sommer@ca.cushwake.com. Source: Canada Mortgage and Housing Corporation – Calgary Rental Market Report 2005. The complete report can be downloaded from CMHC’s website, www.cmhc-schl.gc.ca or contact Tim.
