The economic recovery in Western Canadian oil-producing provinces contributed to the first decrease in the national apartment vacancy rate in three years, the Canada Mortgage and Housing Corporation said Tuesday.
In its 2017 Rental Market Report, the federal agency said the vacancy rate for purpose-built rentals in Canadian cities with at least 10,000 people fell to three per cent in October, down from 3.7 per cent a year earlier.
That returns the national vacancy rate to its 10-year average after a two-year spike.
“We’re finding that demand is strong for rental in Canada, including in some of the oil-producing sectors that were not performing as well over the last couple of years,” said Gustavo Durango, senior market analyst at CMHC.
In a sign that Alberta continues to adapt to the 2014 oil price shock, the province had Canada’s third-largest growth in occupied rentals after Ontario and Quebec.
Michael Markidis of Desjardins Capital Markets said it’s a sign that “the bleeding has stopped in most of the major markets located in oil-producing provinces.”
Alberta’s vacancy rate fell to 7.5 per cent in October from 8.1 per cent a year earlier, led by Lethbridge which was down 3.4 percentage points to 5.1 per cent.
“It still has a high vacancy rate relative to Alberta’s history but it’s off the peak that we saw the last couple of years,” said Durango.
Nationally, demand outpaced supply. The number of rental apartments increased by 1.2 per cent or 23,000 in the last year, about half the growth rate noted last year.
Demand was helped by high levels of international migration, improving employment for young adults and the ongoing aging of the population.
High home purchase prices also kept younger households in the rental market longer as they saved for down payments, said Durango. That’s particularly a factor in high-price markets like Vancouver and Toronto, where rental vacancy rates are very low.
Despite low vacancy rates in Ontario and B.C. there is adequate access to rental housing in some form in almost all centres, said Canadian Federation of Apartment Associations president John Dickie.
Between 22 and 38 per cent of all condos in Ontario and the West are rented and a “secondary market” of basements, suites and other units make up more than 40 per cent of total rental supply.
“The secondary market provides a flexible housing supply, which is often lower priced than the primary market,” he said in a news release.
Associations chairman David Hutniak called on the federal government to examine tax policy for rental buildings, while provinces and cities need to look hard at their development charges and planning approval delays.
“Those are the factors holding back much-needed, purpose-built rental supply,” he stated.
Vacancy rates were lowest in the B.C. cities of Kelowna and Abbotsford-Mission at 0.2 per cent and highest in Saskatoon at 9.6 per cent.
Metropolitan Vancouver was at 0.9 per cent, Toronto one per cent, Montreal 2.8 per cent, Ottawa 1.7 per cent, Edmonton seven per cent and St. John’s 7.2 per cent.
The average national monthly rent for a two-bedroom rental apartment rose 2.8 per cent to $989, outpacing inflation of around two per cent.
Rent increases were greatest in Kelowna at 8.6 per cent and fell by 1.3 per cent in Saskatoon and Edmonton.
Average monthly rents for two-bedroom apartments were highest in Vancouver at $1,552, Toronto $1,404 and Calgary $1,247. They were lowest in Trois-Rivieres,Que., at $594.
The average vacancy rate for condominium rentals declined to 1.6 per cent from 1.9 per cent a year earlier.
Average two-bedroom condo rentals were highest in Toronto at $2,000 and lowest in London, Ont., at $996.