Rent rises as vacancies tighten

‘Incentive’ for renters to become buyers

Calgary’s rental market is tightening up as vacancies decline and rent increases, meaning more people may make the move to homeownership, says a federal agency.

“With vacancy rates going lower, that’s going to give the incentive to some people to move into homeownership,” says Richard Cho, senior market analyst with Canada Mortgage and Housing Corp.

The apartment vacancy rate decreased in Calgary and surrounding towns to 1.3 per cent in October, down from 1.9 per cent the previous year, says CMHC in its recent fall rental market report for Alberta.

With rents also going up, some people will likely migrate from rental to homeownership — or into the “secondary” rental market, he says. It consists of things such as condos that investors rent out, rather than purpose-built rental buildings.

With lower vacancy rates comes an increase in rent.

The average two-bedroom apartment rent was $1,150 in October, up 6.1 per cent compared to the previous year.

Bachelor apartments in Calgary averaged $776 per month in October, up 10 per cent compared to the same month last year.

Downtown and Beltline rental units were in the greatest demand in Calgary and also commanded the highest rents in the city in October.

Average two-bedroom rents in the two areas were $1,240 and $1,222, respectively.

In terms of same-sample rents — rent for similar types of apartments in similar-aged buildings — for bachelor units and two-bedroom units, they increased 7.4 per cent and 5.9 per cent, respectively, in October.

The same-sample rent for three-bedroom units increased 4.2 per cent from a year earlier.

In Edmonton, the rent for an average two-bedroom apartment was $1,071 in October, up 3.8 per cent from the same month last year.

“We’re forecasting vacancy rates to remain close to where they are. Factors that have been supporting rental demand this year are expected to continue in 2013. Also with that, the average rents are forecast to increase as well,” says Cho.

The tight rental market has prompted some movement in constructing more accommodation.

“This year (2012), we have seen an increase in rental (construction) starts,” says Cho. “With rents going up and vacancy rates still relatively low, there have been some builders who have seen opportunity and may be able to take advantage of the current situation and be able to start more projects.”