Canada Mortgage and Housing Corp.’s latest survey of Canada’s rental markets yields some surprising finds and some long-term winners.
And, as Peter Mitham discovers, rental housing is a hot topic across Canada as house prices rise above what many people can afford, prompting first-time homebuyers to defer a purchase. Add in economic uncertainties, and both tenants and landlords want a property that makes the best use of their money.
For landlords, however, cash flow remains king. Some perennially tight markets, like Vancouver, have been in vogue with foreign investors who see good long-term potential in a market where new apartment blocks aren’t being built.
Many other markets in Canada are also seeing the purpose-built rental stock shrinking. (The total number of purpose-built rental units in Canada actually increased by 5,648 units last year, however.)
But if Vancouver is a good long-term play, it didn’t – surprisingly – show the most dramatic increases in average rents last year nor did vacancies plummet significantly. Nor did Montreal or many other of the usual suspects.
The cities that showed the most potential to investors were those in transition, or on the fringes of tight markets. Suburbs of Montreal, the resource-driven economies of the Prairies that got a boost from resurgent oil and gas exploration last year, the rustbelt towns of southern Ontario were all where the opportunity was – and may well continue to be – through 2012.
What follows is a series of vignettes of some of the opportunities and markets that repeatedly surface when the numbers from Canada Mortgage and Housing Corp.’s latest Rental Market Statistics publication are crunched and sorted.
The community profiles look at trends in vacancies and monthly rents in each area; the charts and tables show how the communities stack up on a national scale.
A wealth of additional information for each province and what the statisticians term “Census Metropolitan Areas” is available online at www.cmhc.ca, but the following offers a glimpse of what lies ahead for 2012, based on what happened in 2011.
Alberta
Brooks
Home to meat packing plants that have attracted hundreds of new residents, Brooks is one side of Alberta’s booming economy. But with falling vacancies and a shrinking rental stock, the rental market is approaching that of a larger centre such as Edmonton. Vacancies were down 17% in 2011, hitting 7.3%, while total units dipped 1.1%. With approximately 28.5% of local residents renting, this trend poises the market to be a prime spot for landlords to serve a growing need.
Housing is perpetually tight in Calgary, the power centre of Alberta’s oil sector. Construction of new office towers and the companies tenanting those same towers have created jobs that continue to draw people to the province. The city saw vacancies drop 44.4% in 2011, hitting 2% -- one of the lowest rates in the country. Meanwhile, the total number of units available to rent also slipped, boosting upward pressure on rents. The greatest increases were seen on one-bedroom units, which rent for an average of $899 a month, and two-bedroom units, now $1,078 a month. Canmore
Despite a boom in new housing, Canmore hasn’t kept up with demand from renters. Close enough to Banff to be a retreat from Calgary and a home for resort workers, Canmore offers just 131 purpose-built rental units and the lowest vacancy rate in the county – 0. Demand for new rental units is strong enough to snap up anything that does come along; there were two units vacant last year, and none now. Rents for current listings are frequently in excess of a $1,000 a month, even for one-bedroom suites. Edmonton
The academic and political hub of Alberta, Edmonton benefits from schools and hospitals that keep the rental market thriving. Despite the dubious distinction of being tops in Canada for homicides, Edmonton’s resilient rental market saw rents post stronger growth than in Calgary in 2011. A one-bedroom unit now commands and average of $857 a month, while two-bedroom units command $1,037 a month. Vacancies have dropped from 4.1% to 3.3% – a trend set to continue in step with demand for oil and gas exploration and other resource sector activities. Grande Prairie
A jewel of Northern Alberta, Grande Prairie posted the strongest growth in one-bedroom rents of any market in Canada last year at 7%. Rents may not be the most expensive in the country, at $763 a month, but with vacancies sitting at 3.5% -- down 66.3% from last year – builders are moving to feed demand. Oil and gas sector activity is driving tenant demand, with Grande Prairie conveniently located between Edmonton and the Peace River oil and gas fields of northeastern British Columbia. Lacombe
Located just north of Red Deer, this bustling Central Alberta town doubles as a suburb of Red Deer and a bedroom community for Edmonton, a 90-minute drive north. But with purpose-built rentals declining and vacancies half what they were a year ago, the upside for landlords is clear. Upward pressure on rents looms for residents who want to be centrally located in one of the country’s strongest job markets as vacancies move south of 5.6% and supply tightens. Lethbridge
A university town on one of the main east-west routes across Canada’s Prairie provinces, Lethbridge enjoys a small-town feel in a beautiful setting. Rents posted some of the strongest growth of any market in Canada in 2011, thanks to the city’s post-secondary institutions and a welcoming climate for seniors. The population grew 1.4% to 87,882 last year, with the average age being 37. A one-bedroom apartment now rents for an average of $758 a month, while a two-bedroom apartment commands $851 a month. Lloydminster
Located in Alberta for statistical purposes, this city’s tight rental market straddles the Alberta-Saskatchewan border and includes the adjacent towns of Lashburn and Marshall, both in Saskatchewan. Oil, gas and agriculture and big business here. The town is home to the Lloydminster upgrader, which has benefited from oil sands development, and plans are afoot for a biodiesel plant. Landlords, in turn, have seen vacancies plummet 69% over the past year – more than Grande Prairie, with which Lloydminster shares a 3.5% vacancy rate – and rents have strengthened accordingly. The city’s Alberta side has tended to see stronger population growth than its Saskatchewan side, but the city’s population has consistently posted double-digit rates of growth since the 1970s.
Okotoks
This bedroom community south of Calgary has benefitted from its neighbour’s boom, with strong demand from tenants seeking a place close enough to the city but beyond its shadow. Similar to Canmore, it is one of a handful of communities where vacancies dropped 100% in 2011. While the availability rate stands at 3.9%, any units that do become available are typically snapped up quickly. With no changes in stock, this is likely to continue for the foreseeable future. Posted rents start at approximately $1,200 a month for duplexes and townhomes.
This fast-growing city located between Edmonton and Calgary is a hub in its own right for central Alberta. A service centre with a stable industrial base, the city is a bedroom community for the province’s largest cities with an economy of its own providing local employment. Vacancies sit at 2.9%, down 60% from a year ago. This poises rents to reverse a decline seen most significantly in studio apartments; family-oriented units have remained the most resilient, with units of two bedrooms or posting modest gains. A one-bedroom suite rents for $694 a month, down slightly from a year ago, while two-bedroom units average $827 a month and larger units commend $949 a month. Wetaskiwin
Wetaskiwin may be off the Highway 2, but this has helped make it a desirable bedroom community for Edmonton, with the added bonus of being closer to the city’s international airport than Fort Saskatchewan, St. Albert and communities to the north of the city. Combined with rising absorption and a declining stock of rental housing, the city is a stable long-term play for savvy investors as Edmonton continues to grow south. Approximately 35.6% of Wetaskiwin residents rent. Vacancies average 6.4%, while current listings peg one-bedroom apartments at $700 a month and up. British Columbia
Courtenay
Vancouver Island’s laid-back lifestyle helps support the rental market in Courtenay, which is moving from a resource-based economy to one driven by tourism and supported by the military base CFB Comox. A popular destination for retirees, approximately a fifth of the population is seniors. Vacancies in Courtenay have continued to tighten even as the rental stock as declined, and now average 3.5%. The market is stable, but the demand for new homes will continue to exert pressure on the existing purpose-built rental stock, primarily older buildings. Fort St. John
Oil and gas exploration drive rental activity in Fort St. John and nearby Dawson Creek, which enjoys similar conditions in its rental market. Northern Lights College in Fort St. John broadens the city’s appeal to newcomers, including a number of foreign students who come to pursue English and other studies. Renewed interest in the resource sector in 2011 helped cut vacancies to 5.1%, even as the existing rental stock fell by approximately 40 units. Posted rents for one-bedroom apartments are in the range of $850 a month. Kitimat
The question investors face looking at Kitimat is whether or not it’s too late to jump in: Once the poster child for down-at-the-heel northern communities, Kitimat saw a stunning 82.1% drop in vacancies from 30.2% to 5.4%. The trend, linked to the upgrade of Rio Tinto Alcan’s aluminum smelter, is set to continue as plans for a Liquefied Natural Gas (LNG) terminal proceed. The jobs promise to reverse years of declining population, and bodes well for what is emerging as a boom-time rental market with new rental units already being built to meet demand. Manitoba
Portage La Prairie
With vacancies sitting at 1.3%, tighter than major cities such as Vancouver, Portage la Prairie landlords are enjoying good times. Driven by investment in local potato processing plants and retail developments, the city is becoming a southern Manitoba hub and attracting new residents. Rental stock is also tightening, as developers move to build new homes to accommodate newcomers, further boosting landlords’ fortunes. It’s a positive shift from two years ago, when some observers touted the city as one of the worst places in the country to live. Thompson
The so-called “Hub of the North” may seem a surprising play for landlords, but Thompson is one of a handful of communities in Canada that saw vacancies drop 100% in the past year. In addition, the city’s total rental stock dropped 4%, adding further pressure to the market. Drivers of demand include the Vale Inco nickel operations and the Wuskwatim hydro project (set to complete this year). The city remains a retail and service centre for northern Manitoba, with a shortage of affordable housing. Winnipeg
Manitoba’s capital can’t help but see steady demand, thanks to government and post-secondary institutions, and a resurgent financial sector. Winnipeg has attracted new residents seeking good quality housing, driving up rents in consequence as older units are upgraded or replaced by new units. Vacancies sit at 1.1%, driving up rents for one-bedroom units by 4.3% and 4.5% for two-bedroom units. Studio apartments have seen the greatest increase at 7.2% to $522 a month. A two-bedroom suite commands $874 a month. New Brunswick
Fredericton
While subject to the comings and goings of students enrolled at the University of New Brunswick and St. Thomas, among other schools, Fredericton also enjoys a strong government presence and central location that makes it a prime location for companies doing business across New Brunswick. Proximity to the U.S. border is also an advantage. A one-bedroom unit rose 3.9% last year, and now rents for an average of $637 a month. The increase occurred despite relatively stable vacancies market-wide of just 2.4%. Two-bedroom units command $755, while houses rent for an average of $1,005 a month.
Saint John
Canada’s oldest incorporated city is banking on shipbuilding, one of the city’s historic industries, to bolster its fortunes. A new naval contract recently awarded to Irving Shipbuilding will boost employment at its Saint John yards, while the energy sector has also boosted employment in the traditionally working class city. Two-bedroom units here saw one of the country’s biggest rent increases last year, rising 3.7% to $670 a month. While vacancies increased market-wide to 5.9%, employment growth in the coming years promises to lower that figure significantly.
Grand Falls-Windsor
Declining vacancies and new construction flags Grand Falls-Windsor as a centre worth attention. A company town from the start, it was hit hard by the closure of the local pulp mill in 2009. Nevertheless, vacancies dropped 45.5% in 2011 to bottom out at an exceedingly tight 0.6%, even as purpose-built rental units expanded the stock 3.1% to 661 units. That leaves four units available for newcomers to rent, and opportunities for investors to provide new supply. St. John's
As in many other provincial capitals, government employment and post-secondary institutions have kept rents rising in the upper end of the market. St. John’s posted the biggest gain in two-bedroom rents of any city in Canada last year, with units commanding an average of $770 a month – up 6.5% from 2010. Three-bedroom-plus accommodation also posted a respectable 4.9% increase over the previous year. Although vacancies are trending higher, they’re still tight at 1.5% city-wide. This is a stable market with rock-solid fundamentals. Nova Scotia
Halifax
Government, hospitals, universities, a strong military presence and a port: What more could this capital city want? Vacancies average a respectable 2.4%, but with the awarding of a new naval shipbuilding contract to local dockyards, expect demand for housing – rental and otherwise – to intensify in the coming years. This promises to put upward pressure on rents, which are already enjoying significant year-over-year gains relative to the rest of Canada. Rents for studios rose 6% in 2011 to reach $670 a month, while two-bedroom units saw rents increase 3.8% to top $925 a month. Ontario
Barrie
One of the fastest-growing metropolitan areas in Ontario, Barrie can attribute much of its growth to that of Toronto, 90 kilometres south. It effectively serves as a bedroom community of the larger metropolis, with a third of its residents commuting outside the municipality for work. Rental vacancies dropped 43.8% in 2011, and with minimal additions to the rental stock, tenant demand should continue to boost rents for select housing types. While one bedroom rents rose 3.9% last year to $884 a month, one of the biggest increases in the country, units of three bedrooms and more were unchanged at $1,120 a month and studio rents actually fell 1.3%. Belleville
The city’s industrial base is complemented by proximity to CFB Trenton and several post-secondary and penal institutions in Kingston, an hour’s drive east. Vacancies average 3.6%, but rents for one- and two-bedroom apartments have posted increases that put them in the top-10 nationwide. One-bedroom apartments rent for an average of $735 a month, up 4.4% from last year, while two-bedroom suites lease for $840 a month, up just 3.7% from last year. Brantford
The last half of the 20th century was not kind to Brantford, but with vacancies down 53.8% in 2011 it has given landlords cause for cheer. Small additions to the rental stock underscore investor interest, driven by the presence of some large industrial concerns and proximity to Toronto. A bedroom community with jobs of its own to offer residents, it is bolstering its ability to weather economic storms. Studio rents posted the second-biggest increase of any metropolitan area in Canada last year, hitting $654 a month – a 10.5% increase from 2010. One-bedroom rents rose 4.5% to $726 a month. Cobourg
Beautification of the Lake Ontario waterfront has boosted the livability of Cobourg, which enjoys a prime position between Toronto and Kingston with good highway access and other transportation connections. Small surprise, then, that rental vacancies average 1.9%, down 26.3% from last year. Primarily a residential community, Cobourg’s economy is underpinned by agriculture and food, tourism and more recently the Cobourg Innovation Centre’s focus on environmental technology companies. Greater Sudbury
Sudbury, known to generations of school children for its giant nickel, now claims fame for rents rising faster than the rate of inflation. All classes of rental housing saw rising rates this past year, while vacancies were stable at 2.7%. Studios posted the greatest increase of any class, at 5.9% ($540 a month). One- and two-bedroom units posted more modest gains of 3.5% and 4.8%, respectively, with rents of $712 and $887 a month. Average rent on single-family homes run $946 a month. Diversification away from mining has emphasized the city’s role as an administrative and service centre for Northern Ontario. Guelph
Guelph is close enough to Toronto to serve as a bedroom community, but its eponymous university also provides a stable base of institutional jobs and government-funded research programs. Auto parts manufacturer Linamar is the city’s single-biggest employer, helping keep the local unemployment rate among the lowest in Canada. The various enterprises supports a rental market catering to students and residents connected to the city’s institutions. Rental vacancies fell 62.5% last year, hitting 1.2%, a trend that promises upward pressure on rents which spent the last year lagging the inflation rate.
Posted via email from Markham Real Estate Today with Asif Khan
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