The cost of renting has shot up more in Hamilton this year than anywhere else in the province, according to new numbers from the Canada Mortgage and Housing Corporation.
With an increasing number of people now priced out of the Toronto market and moving to Hamilton, it's a case of demand outpacing supply — and analysts also warn that as some Hamiltonians won't be able to afford to buy a house in the city's surging market, more will be forced to stay in rentals.
'For the locals, prices have widened the gap between renting and owning.' - CMHC analyst Abdul Kargbo
The cost of renting a two-bedroom unit in Hamilton rose 3.5 per cent when comparing April of this year to April 2014, the CMHC says. That's above the provincial average of 2.7 per cent, and well above slower markets like Ottawa and Kitchener.
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"We're seeing a significant influx of people from the GTA moving into Hamilton," said CMHC senior market analyst Abdul Kargbo. The city's housing prices still look like a deal when compared to Toronto's, which is good news for Toronto transplants.
"But for the locals, prices have widened the gap between renting and owning," Kargbo said. "It's becoming a challenge for [Hamiltonians] to jump into home buyership."
That means the people who can't afford to buy are renting longer, which drives down the city's vacancy rate. Hamilton's vacancy rate dropped 1.8 percentage points year over year for April – and that's tied with Brantford for the sharpest such decline in the province. It now sits at 1.8 per cent. A healthy rental market has between 2 and 3 per cent of its apartments sitting vacant.
'It's very tight'
In April, Hamilton's vacancy rate was equal with Toronto's, where it is notoriously difficult to find a decent apartment. "It's very tight," Kargbo said. "It's significantly lower than the average."
The province's rental apartment vacancy rate for urban centres was 2.5 per cent in April 2015, down from 2.8 per cent in April 2014.
The rental market is actually being squeezed from both sides. The employment outlook for people in the 15-24 age bracket is getting better, Kargbo says, which means more people are moving out of their parent's places and into rentals. That influx of new renters coupled with older rentals who can't afford to buy a house yet has severely tightened the city's rental market.
"Improving employment conditions for younger households who typically rent and fewer rental households moving to homeownership supported rental demand in Ontario this spring," said CMHC's Ontario Regional Economist Ted Tsiakopoulos in a statement.
Tight market means moratorium on condo conversions
In fact, Hamilton's rental market is so tight that a two-year moratorium on apartment building conversions to condos is in place after Hamilton's apartment vacancy rate dipped to its tightest level in more than a decade.
The vacancy rate for two-bedroom apartments in the city of Hamilton was 1.6 per cent in 2014, according to numbers generated specifically for the city by the CMHC.
City policy stipulates the vacancy rate has to be higher than 2 per cent when an apartment is converted to a for-sale condo, and must still be above 2 per cent after the conversion.
That 1.6 per cent vacancy for two-bedroom apartments means that condo conversions of buildings holding many two-bedroom units will "not be permitted for 2015 and the next 24 months," according to a city report.