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March 01, 2019

Real Estate Insider - Rentals rising

The rental market sees growth in the soft new home market

Maria Bartolotti

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The rental market in Calgary is reaping the benefits these days of a number of economic factors combining to create heavy demand by people who are wanting to rent a place to call home.


The so-called mortgage stress test, which is making it more difficult for some people to qualify for lending, the threat of higher interest rates, elevated home prices, a trend in declining home prices as well, and continued uncertainty when it comes to the economy and the labour market are all weighing heavily on the minds of
consumers in Calgary these days.

All that is buoying the city’s rental market.

“Rental rates appear to be on the rise in part due to an increase in demand thanks to increasingly strict mortgage lending rules, a bottoming out of rental market pricing, and less new rental housing coming online,” said Shamon Kureshi, CEO of Hope Street, a rental and property management company based in Calgary.

“Landlords have reason to be optimistic for the coming year.”

For example, Kureshi says Calgary-area private landlords experienced the average rental rate, blended for all types of advertised rental homes and condos, reaching $1,671 per month as of January 15. This amount represents a 13 per cent hike in the past five months as the average rental rate in September 2018 was $1,481.

The Greater Calgary Area’s vacancy rate has also edged down to three per cent, which is down from 4.1 per cent in October.

The Rentals.ca website platform released an interesting report highlighting rental market predictions for 2019 from experts in the real estate industry.

James Cuddy,  senior market analyst for Canada Mortgage and Housing Corporation, said in the report that spiking oil prices and high unemployment at 8.2 per cent has “put downward pressure” on the rental market.

“Given high unemployment and recession, affordability has been eroded across Calgary... These affordability challenges are putting an increased demand on rentals, and the millennial generation and international migrants are leading this demand,” added Cuddy.

Yes, vacancy has plunged in the market but the city continues to have an elevated level of inventory — higher than most other Canadian cities in fact.

Matt Danison, CEO of Rentals.ca, which lists properties for rent across Canada, said demand for the rental market in Calgary will continue to increase this year and the company is predicting a four per cent hike in rental rates in 2019.

Ben Myers, president of Bullpen Research & Consulting Inc., a boutique residential real estate advisory firm, said many Millennials today are choosing not to buy for various reasons, including costs and the tighter mortgage rules.

“They like the flexibility to live wherever they want, to be able to move and not worry about selling, especially in Calgary, where you’ve seen some decline in house prices in the last couple of years,” he said.

“When you have declining prices... it just makes people nervous about purchasing. It may be their preferred way to live – to own something — but they don’t want to buy unless they think prices are going to go up.”

According to Rentals.ca, Calgary rents in December averaged $1,270 for one-bedroom units and $1,448 for two-bedroom suites.

Here are some interesting numbers about the rental market in the Calgary census metropolitan area. According to the most recent Rental Market Survey by the CMHC, the apartment vacancy rate significantly decreased for the second consecutive year to 3.9 per cent in 2018 from 6.3 per cent in 2017. The average
two-bedroom rent was $1,272 in October 2018 compared to $1,247 in October 2017, added the report.

Supply in the primary rental market continued to post strong gains in 2018, growing by 3.7 per cent. Purpose-built rental apartments increased by 1,407 units from 38,160 in October 2017 to 39,567 in October 2018. However, demand outpaced supply: 2,268 additional units were occupied in October 2018 compared to last year.

Of course, it’s important to note that there is a significant portion of the new multi-family residential real estate market — particularly the condo/apartment sector — that has been bought in recent years in Calgary by investors who are renting their properties out.

For them, the timing has been perfect because demand is there and the prices they can demand are being swayed by the market in an upward direction.

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