While homes sit unsold, Calgary's rental market is heating up: CMHC
'We’re right in the middle of this transition that’s occurring in the Calgary market right now.'
People may not be in a hurry to buy homes in Calgary right now but demand for rental housing continues to rise, according to a new report from the Canada Mortgage and Housing Corporation.
"There are some fundamental factors that are impacting the type of units that individuals are demanding," CMHC market analyst James Cuddy said.
He said those factors include an unemployment rate that remains persistently higher in Calgary than the rest of the province, a lack of growth in Calgarians' disposable income, higher interest rates and more stringent rules for borrowing, commonly referred to as the mortgage "stress test."
"This has put pressure on some individuals' ability to move into home ownership and has essentially prompted them to look at more affordable options," Cuddy said.
"Some individuals are actually renting for longer, so some of the demand in the housing market is being shifted away from home ownership and toward the rental market."
Rental demand outpaces supply growth
So, while many unsold homes continue sit on the market, Cuddy said Calgary saw its vacancy rate decline to 3.9 per cent in 2018, down from 6.3 per cent the year before.
This came despite an increase in the number of rental units on the market.
"Supply grew both in terms of purpose-built rentals and condo rentals, but demand outpaced that growth," Cuddy said.
"And it's interesting — 2018 was the first time we saw average rents rise since the recession. So we're right in the middle of this transition that's occurring in the Calgary market right now."
At the same time, Cuddy said, "inventory levels in the home-ownership market still remain elevated."
He said condos make up the bulk of that inventory and, in response, "builders have started to slow down production."
That, combined with the declining vacancy rate in the rental market, prompted CMHC to downgrade its "vulnerability" rating of overbuilding in Calgary's housing market to "moderate."
In the CMHC's previous report from October, Calgary's housing market had a "high" vulnerability of overbuilding.
"Overbuilding is flagged when the rental apartment vacancy rate and/or inventory of newly built and unsold housing units are higher than normal," the CMHC explained in its report.
Cuddy said housing demand is also on the rise because more and more people are moving to Alberta.
After two years of declines, he said 2018 saw net growth in interprovincial migration to Alberta.
"And we've seen some steady growth in terms of international migration, too," Cuddy said. "So this is also contributing to higher demand for rentals in Calgary."
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