July 12, 2012 | CREBNow
A Changing MarketA spurt in Calgary's population growth, plus a strong economy and rising home prices is starting to make its mark on the city's rental vacancy and in turn could mean changes for the housing market.
The average apartment vacancy rate in Alberta's urban centres decreased from 4.7 per cent to three per cent between April 2011 and April 2012, according to the Canadian Mortgage and Housing Corporation (CMHC). In the Calgary Census Metropolitan Area (CMA), the decrease was 2.5 per cent. Just south of Calgary, Okotoks posted a vacancy rate of zero per cent in April 2012 while the highest vacancy rate in the province was Wood Buffalo at 10.8 per cent.
"A tight rental market results in less choice for renters and ultimately pushes up rental rates," said CREB® economist Ann-Marie Lurie. "As rental rates rise, more people consider home ownership as the spread between ownership and rental narrows; this drive up the demand for housing."
According to Calgary's 2012 Civic Census, net migration to the city between April 2011 and April 2012 resulted in 19,658 more residents, numbers similar to those seen in 2007 and a significant increase compared to 2011's 9,563 new residents.
The CMHC reported the average two-bedroom apartment in the Calgary CMA, including new and existing structures, was $1,113 per month. According to www.rentfaster.ca, apartments ranged from as much as $5,000 a month for a 2,300 sq. ft. two bedroom condo in Eau Claire to $1,800 for an 860 sq. ft. two-bedroom condo in Bridgeland to a $1,000 for a 950 sq. ft. apartment in Chinook Park.
The Federation of Canadian Municipalities (FCM) Quality of Life Reporting System (QOLRS) said over the last 20 years the proportion of rented-to-owned dwellings has been in decline.
"Despite a modest increase in rental starts between 2007 and 2010, less than 10 per cent of housing starts in QOLRS communities since 2001 were intended for the rental market."
The tight rental market in Calgary can be seen through the rental process itself. CBC recently reported one rental unit in Calgary was viewed by more than 100 people resulting in 50 filling out applications with a renter finally selected after two interviews and a "stringent screening process".
"Rental housing is an often overlooked yet important component of Canada's housing system," said a QOLRS In Brief report. "One-third of Canadians are renters. This includes young Canadians, creating new renter households when they leave the family home; older Canadians, seeking apartment living when they no longer need or want to maintain larger family homes; and new Canadians, a critical component of our future labour force, many of whom initially rent before they transition to home ownership."
With new rule changes recently implemented for Canadian mortgages including the reduction of the amortization period from 30 years to 25 and a drop in the limit Canadians can borrow when refinancing their homes from 85 per cent to 80 per cent of the value, renters looking to make the move to homeownership may have to wait a little longer.
"The new mortgage rule changes can result in some people having to rent for a longer period of time before they move into ownership," said Lurie. "Given the tighter lending policies, they also may simply have to adjust their expectations on what they can buy, for example, an average condo versus a single-family home."
For those looking to make the move from renting to home ownership, the RBC Housing Trends and Affordability Report for May 2012 states Alberta has an "attractive" affordability rate.
"Homebuyers in the Calgary area are motivated by a booming provincial economy, strong job creation and attractive housing affordability," the report said. "Despite higher resales lately, home prices so far have remained flat for the most part, with some weakness observed in condominium apartments."
In Calgary, home resales increased by 7.4 per cent in the first quarter of the year.
The report said first quarter 2012 resales in Alberta increased by 11.5 per cent year-over-year with April showing further gain.
"The levels of Alberta's measures remained among the lower, if not, the lowest among the provinces," said the report. "With such attractive affordability and a provincial economy that is ramping up considerably it is not surprising to see home resale activity taking off recently."
Will higher rent prices prevent people from home ownership? or is the market still moving in the right direction?