The rental market is getting tighter in Hamilton, as the vacancy rate falls to its 12-year low, according to the latest report from Canada's national housing agency.
The average apartment rental vacancy rate dropped to 2.2 per cent in October 2014 in Hamilton census metropolitan areas, which covers Hamilton, Burlington and Grimsby, compared to 3.4 per cent a year ago, according to the fall rental market report released by the Canada Mortgage and Housing Corporation on Tuesday.
'Where do you go? What do you do? You have to have a roof over your head.' - Tim Mattioli, president, Realtors Association of Hamilton-Burlington
CMHC found that the current vacancy rate in Hamilton CMA is at its lowest level since 2002, when the rate was 1.6 per cent. The drop also means the region experienced one of the sharpest declines in the province, along with Peterborough (2.9 per cent), Barrie (1.6 per cent) and Windsor (4.3 per cent).
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Province-wide, the Ontario vacancy rate declined to 2.3 per cent from 2.6 per cent in the same period.
"A tighter rental market in 2014 enabled landlords to fill available units with greater ease," the report said.
The decline in vacancy rates in Hamilton applied to all bedroom types, except for bachelor units, which remained stable at just over 5 per cent.
Three-bedroom units experienced the largest decline in vacancy rate from 2013 to 2014, dropping from 5.1 per cent to 1.9 per cent. Two-bedroom units also registered the lowest vacancy rate in 12 years, falling to 1.6 per cent in 2014 from 2.9 percent in 2013.
Supply down, demand up
The reason for this downward pressure? Supply and demand, CMHC said.
On the supply side, the number of apartment units in the rental market went down by 222 units in 2014 compared to last year. Demand, however, went up in the same period, driven largely by strong employment among young adults, stable immigration and the rising cost of home ownership, CMHC said.
"Strong full-time employment in the 15 to 24 age group encouraged household formation among young adults," the report said. "A higher level of household formation among this group tends to increase overall rental housing demand, as young adults are predominantly renters."
The rising cost of home ownership since the spring of 2014 also drove up the demand in the rental market, CMHC said, as prospective first-time home buyers postpone their purchase and young adults choose to rent instead of buying.
That trend, however, doesn't seem to apply to Hamilton's Central East, where the vacancy rate in 2014 is the highest across Hamilton at 5.2 per cent. CMHC said that reflects the trend that renters are vacating their units and moving into home ownership in that area.
"The average rent for two-bedroom units was equivalent to a monthly mortgage carrying cost for an average condominium apartment," the report said, adding that the average monthly mortgage payment for a condo in Hamilton Central was $752, the lowest across the Hamilton CMA.
CMHC's 2013 rental market report also noted that the scenario of renters becoming homeowners was more prevalent in Hamilton Central than in other areas.
The average rent went up for all bedroom types in 2014, with increases ranging from 1.7 per cent to 2.9 per cent. However, the rents grew at a slower rate among all bedroom typos compared to previous year, due to rent control.
No break for tenants
The tighter rental market paints a grim picture for prospective tenants, said Tim Mattioli, president of the Realtors Association of Hamilton-Burlington.
"It's kinda doom and gloom for someone in the rental market looking for something right now," he said. "Where do you go? What do you do? You have to have a roof over your head."
Mattioli said the demand for rental housing is mostly driven by Hamilton's large population of people on social assistance, the steady stream of new immigrants, as well as other Canadians who relocated to Hamilton because of the city's attractive job outlook.
"There's a lot of reasons to come in to Hamilton. But for every person that comes to Hamilton, you got to have a roof over their head," he said.
Mattioli also predicts that the tight rental market isn't going to ease any time soon.
"All indications are that the real estate market will pretty much stay the way it is through 2015. If the real estate market stays there, then there's nothing to say that the rental market's going to be any different."
As part of its mandate to monitor Canada's housing market, CMHC conducts a rental market survey twice a year to provide information on vacancy, availability and rent. Its reports are released in June and December.