Higher va­cancy rates curb rent hikes

Calgary Herald - Calgary Herald New Condos - - New Condos - KATHY MCCORMICK

It all de­pends on your per­spec­tive.

If you’re a renter, it’s good news; if you’re a land­lord, not so much.

Higher va­cancy rates have in­hib­ited rent in­creases this year, says Richard Cho, se­nior mar­ket an­a­lyst with Canada Mort­gage and Hous­ing Corp.

“The rental rates soft­ened this year with com­pe­ti­tion from the home mar­ket due to in­creased af­ford­abil­ity,” he told del­e­gates to CMHC’s re­cent an­nual Hous­ing Out­look Con­fer­ence.

Monthly car­ry­ing costs for re­sale home mortgages peaked in 2007, while rents have been “rel­a­tively sta­ble,” says Cho.

“There was a gap be­tween the two of $962 in 2007, but now it was about $300 this spring. That’s an in­cen­tive for renters to move into home own­er­ship.”

But condo prices and home val­ues are cur­rently in­creas­ing, “so the gap widens,” and peo­ple will be less in­clined to move, he says.

The av­er­age monthly rent for two-bed­room apart­ments was $1,148 in 2008. This year, the av­er­age is ex­pected to be in the range of $1,075, says CMHC.

But that’s not the only fac­tor af­fect­ing the apart­ment rental mar­ket, says Gerry Bax­ter, ex­ec­u­tive di­rec­tor of the Cal­gary Apart­ment As­so­ci­a­tion. “There are more units out there, even though the rental uni­verse has shrunk con­sid­er­ably.”

Condo con­ver­sions have taken some rental units out of the mar­ket over the year, al­though the rate of con­ver­sions has de­creased with the mar­ket slow­down.

“But then there are all those con­dos in the mar­ket where the own­ers couldn’t sell them, so they opted to rent them in­stead,” says Bax­ter.

“Add in the fact that the in-mi­gra­tion dur­ing the boom turned into the great skedad­dle, and peo­ple left the city. Now there’s a smaller rental pop­u­la­tion as well.”

CMHC is fore­cast­ing an apart­ment va­cancy rate of four per cent this year. But Bax­ter is ex­pect­ing va­cancy rates to be even higher than the fore­cast.

“Most land­lords I have talked to are say­ing that it’s a much big­ger chal­lenge to try rent­ing than it has been in the past — and the re­al­ity is that the va­cancy rate could be more in the five-to seven-per cent range,” he says.

That’s good news for renters, who are able to take their time and shop for the best deal, says Bax­ter. “It’s com­pet­i­tive out there, so there are in­cen­tives and low­ered rents,” he says.

Land­lords needed “to do more to com­pete,” says Cho, adding that could tighten up slightly next year.

CMHC sees the $1,075 av­er­age rent fore­cast for a two-bed­room unit this year in­creas­ing marginally to an av­er­age of $1,100 next year.

Cal­gary Her­ald Ar­chive

Gerry Bax­ter, pres­i­dent of the Cal­gary Apart­ment As­so­ci­a­tion.

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