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Vacancy rate for purpose-built rentals hits two-decade low

Canada’s vacancy rate for purpose-built rental apartments decreased to its lowest level since 2001, according to the latest Rental Market Report from Canada Mortgage and Housing Corporation (CMHC). 

CMHC says that while rental supply increased sharply between October 2021 and October 2022, demand was stronger. The national housing agency credits surging demand for pushing the vacancy rate down from 3.1 per cent to 1.9 per cent in 2022.

Higher net migration and mortgage rates, which drove up already-elevated costs of homeownership, made it difficult and less attractive for many renters to transition to homeownership, says CMHC.

The overall average rent growth for two-bedroom purpose-built apartments was 5.6 per cent, a new annual high, well-above-average rent growth recorded between 1990 and 2022. 

 

Turnover

 

New data published by CMHC indicates the average rent growth for two-bedroom units that turned over to a new tenant was well-above rent growth for units without tenant turnover, 18.3 per cent compared to 2.9 per cent, adding to affordability challenges. 

The report notes that landlords can typically raise rents to current market levels once a tenant vacates a unit. Landlords may also renovate the unit and subsequently ask for higher rents from new tenants. 

Among the three largest markets, Toronto had the most significant difference in rent growth for units that turned over compared to units without turnover, followed by Vancouver and Montréal. 

Rent growth for units that turned over in Toronto was 29.1 per cent and 2.3 per cent for non-turnover units; in Vancouver, it was 23.9 per cent and 3.9 per cent; and in Montreal, it was 14.5 per cent and 3.5 per cent.

 

Condos

 

Rental condominiums accounted for 19.3 per cent of the total rental stock across centres. In Vancouver, Calgary and Toronto, more than a third of rental supply are condominiums.

According to the report, the average rent for a two-bedroom condo significantly increased to $1,930 from $1,771, about 9 per cent year-over-year.

 

CMHC’s report highlights

 

Toronto

Toronto’s primary rental apartment vacancy rate fell to 1.7 per cent in 2022 from 4.4 per cent the previous year. Fewer disruptions to economic activity and immigration in 2022 resulted in a surge in rental demand.

 

Montreal

Strong demand in Montreal’s rental market pushed the vacancy rate down from 3.7 per cent in 2021 to 2.3 per cent in 2022. Rent increases were also significant, especially for renters who moved.

 

Vancouver

In Vancouver, the vacancy rate decreased from 1.2 per cent in 2021 to 0.9 per cent in 2022. Higher homeownership costs and migration to the region led rental demand to increase faster than supply.

 

Calgary 

With Calgary’s economy growing beyond pre-pandemic levels, the rental market tightened to conditions not seen since Alberta’s last economic boom. The overall vacancy rate dropped to 2.7 per cent (from 5.1 per cent in 2021), the lowest since 2014.

 

Edmonton

A strong economic rebound and record migration flows in Edmonton contributed to rental demand outpacing new supply in 2022. The purpose-built rental apartment vacancy rate was 4.3 per cent in October 2022, down from 7.3 per cent in October 2021.

 

Ottawa

In Ottawa, strong demographic and economic conditions supported rental demand, and as a result, the vacancy rate dropped from 3.4 per cent in 2021 to 2.1 per cent in 2022. The greatest declines occurred in central neighbourhoods, partly because of the return of post-secondary students.

 

Victoria 

Record high supply growth has helped alleviate rental market tightness while rising demand has accelerated rent increases in the Victoria rental market. The vacancy rate rose slightly to reach 1.5 per cent (from one per cent in 2021), mainly from the expansion of the rental apartment stock.

 

Hamilton

In Hamilton, the vacancy rate for purpose-built rental apartments was the lowest since 2002 at 1.9 per cent. The number of occupied units increased due to more student renters, higher full-time employment and fewer renters transitioning into homeownership.

 

Halifax

The vacancy rate in Halifax did not change in 2022, staying at the record low of one per cent. The number of rental apartment units increased by 1,348. This was the lowest number of annual rental completions since 2016.

 

Read the full report from CMHC, including detailed region-by-region breakdowns, here

 

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