The Canada Mortgage and Housing Corporation released the results of its Rental Market Survey, announcing a decline in the national average vacancy rate, offsetting two years of increases.
The average vacancy rate of purpose-built (primary) rental apartments dropped from 3.7% in October 2016 to 3% in October 2017. The vacancy rate takes into consideration Canadian centres with populations of 10,000 or more.
“Nationally, increased demand for purpose-built rental apartment units outpaced growth in supply, leading to a decline in the vacancy rate and a reversal of the trend we’ve seen over the last two years,” says Gustavo Durango, Senior Market Analyst at CMHC. “Demand for purpose-built rental apartments can be attributed to historically high levels of positive net international migration, improving employment conditions for younger households and the on-going aging of the population.”
The vacancy rate is now in line with the 10-year average. There has been a strong recovery in rental demand, especially in oil producing provinces. We’re not surprised to see rental demand on the rise and vacancy rates low. With new home supply still below healthy levels, prices are too high for many to consider entering the market.
It’s also becoming more popular for some homeowners in major urban centres to sell and move into a rental. Considering how much prices have surged in the last few years, some homeowners are sitting on a lot of money – more than enough to cover the remaining mortgage and live comfortably renting for a little while.
Since October 2016, the primary rental market supply increased by 23,000 units, which is only 1.2%. The average monthly rent on a national scale is $989, but the markets are drastically different.
For example, the average rent for a two-bedroom in Saguenay was $605. In Toronto, the average was $1,404. The rental market gets more expensive when you get into the condo market (secondary).
The CMHC’s Rental Market Survey collected data from 17 major urban centres across Canada for the secondary rental market and found that the vacancy rate dropped from 1.9% to 1.6% year-over-year. Toronto had the highest monthly rent in the secondary rental market at $2,301.
Ontario as a whole saw some of the largest year-over-year rent increases, in places like Belleville (5.9%), Oshawa (5.2%), Hamilton (5.1%), Barrie (4.6%), and Toronto (4.2%).
The national turnover rate is at 20% and Ontario’s turnover rate was below average. That means there are less units becoming available.
With the Greater Toronto Area’s (GTA) real estate market expected to become even more unaffordable in the coming year, there will be a greater stress on rental. At least 50% of buyers in the condo market are investors, which results in more rental inventory.
Does it make more sense to cater to investors so the rental market can maintain a healthy vacancy rate or do we need policy that makes it easier for first-time buyers to get into the market? There are many courses of action, but which is the right one?