The average rental apartment vacancy rate in Canada’s 35 major centres increased to 2.6 per cent in October 2012, from 2.2 per cent in October 2011, according to Canada Mortgage and Housing Corp.’s (CMHC) fall rental market survey.
“Lower levels of household formation among young adults reduced rental housing demand,” says Mathieu Laberge, deputy chief economist at CMHC’s market analysis centre. “This, combined with an increase in the supply of newly constructed, purpose-built rental apartments, pushed Canada’s vacancy rate upward. Meanwhile, demand for rental condominium apartments remained strong, with the vacancy rate holding steady in most of Canada’s largest urban centres, including Toronto, Montreal and Vancouver.”
Ontario vacancy rates rose to 2.5 per cent in October 2012, up from 2.2 per cent in the fall of 2011. Most urban centres registered higher vacancy rates. The lowest vacancy rate was registered in Thunder Bay and Toronto, while the highest vacancy rates were to the west of Toronto. With the exception of Windsor, Peterborough, Hamilton, London, Thunder Bay and Sudbury, vacancy rates moved higher in other centers.
“Some prominent factors dampened rental demand and exerted upward pressure on vacancy rates. Modest job growth, less in-migration and alternative rental housing options moderated demand for rental housing in Ontario,” says Ted Tsiakopoulos, CMHC’s Ontario regional economist. “Other factors were more supportive of rental demand. Economic uncertainty and the rising cost of home ownership in Ontario restrained ‘big ticket’ spending across the province since fall 2011. Consequently, tenants considering the jump to more expensive ownership housing likely postponed this decision.”
Apartment rents for two-bedroom units that were common to both 2011 and 2012 fall surveys rose by 2.7 per cent. This rate of increase in rents exceeded the 1.8 per cent increase registered in fall 2011. This fall’s stronger increase was largely due to rents that were constrained last fall given a much lower allowable guideline increase.
Nevertheless, Ontario apartment rents grew at a slower rate this year versus the allowable Ontario rent review guideline amount of 3.1 per cent. However, the story was mixed across the province. Rental demand rose in Sudbury and Thunder Bay, allowing rents to increase well above the guideline amount. A relatively stronger Northern Ontario economy enabled landlords to fill available units with greater ease. Meanwhile, larger markets such as Toronto and Ottawa saw increases below the guideline amount as landlords found filling vacant units a bit more difficult in the face of rising competition.
