Apartment Vacancies Decline in Alberta

Alberta’s booming economy and strong migratory inflows contributed to a substantial tightening of the province’s rental markets this year. According to the results of Canada Mortgage and Housing Corporation’s (CMHC) annual Rental Market Survey conducted in October, all of Alberta’s 13 major urban centres reported a decrease in apartment vacancies in 2006. The vacancy rate in privately initiated rental apartments in Alberta centres with population of 10,000 or more declined from 3.1 per cent in October 2005 to 0.9 per cent in October 2006.

Edmonton and Calgary, Alberta’s two Census Metropolitan Areas (CMAs), recorded a sharp decline in their vacancy rates in 2006. Following a moderate decline of 0.8 percentage points in 2005, apartment vacancies in Edmonton have tumbled from 4.5 per cent in 2005 to 1.2 per cent this year, the lowest rate since 2001. “A rapidly expanding economy, tight labour market, strong in-migration, and soaring house prices are some of the reasons for the increased demand for rental accommodations in Edmonton,” noted Richard Corriveau, CMHC’s Regional Economist for the Prairie and Territories region. With vacancies declining rapidly across the Edmonton CMA, landlords have raised rents in 2006. The average rent for a two-bedroom apartment unit in 2006 increased to $808 per month, up from $732 in 2005.

By excluding the impact of new structures built since the last survey and conversions from the calculation, we can get a better indication of the rent increase in existing structures. For the Edmonton CMA, the average rent for a two-bedroom apartment in existing structures increased by 9.9 per cent in October 2006 compared to a year ago.

The apartment vacancy rate in the Calgary CMA fell from 1.6 per cent in 2005 to 0.5 per cent this October. “This is the third consecutive year of vacancy rate declines, matching the record low recorded in 1997,” claimed Corriveau. “Record levels of net migration, a shortage of active resale listings, and escalating home-ownership costs helped bolster the demand for rental units,” he added. With vacancies falling below one per cent this year, landlords were able to boost rents substantially. Tenants in the Calgary CMA saw apartment rents for two-bedroom units reach $960 per month, up from $808 in 2005. The average rent for a two-bedroom apartment in existing structures increased by 19.5 per cent in October 2006 compared to a year ago.

Among Alberta’s 11 Census Agglomerations (CAs), seven saw their vacancy rates fall below one per cent, while two of these centres recorded a vacancy rate of zero per cent. The strongest vacancy rate drop was recorded in Wetaskiwin, where the rate fell from 2.4 per cent in 2005 to zero in 2006. Lethbridge’s rental market was not far behind, seeing its vacancy rate tighten by 2.1 percentage points from 2.7 per cent in 2005 to 0.6 per cent in 2006. Red Deer, Camrose, and Wood Buffalo saw their vacancies decline to 0.5, 0.9 and 0.2 per cent, respectively. Similar to last year, Cold Lake recorded the highest vacancy rate of 3.9 per cent in 2006 among all of the CAs in Alberta.

The tight vacancies across the province led to increases in average rents in all of Alberta’s 11 CAs. With a vacancy rate of 0.1 per cent, Grande Prairie landlords hiked the average monthly rent for two-bedroom apartments to $952 this year, up from $790 in October 2005. In Wood Buffalo, the average two-bedroom apartment rented for $1,717 per month, up from the $1,478 paid per month in 2005. “This was the second year in a row that Wood Buffalo was the most expensive centre in which to rent across Canada,” Corriveau claimed.

With the release of its 2006 Rental Market Survey, CMHC has broadened its coverage of the rental market to include apartment condominiums offered for rent in the following centres: Vancouver, Calgary, Edmonton, Toronto, Ottawa, Montréal, and Québec. In 2006, vacancy rates for rental condominium apartments were below one per cent in five of the seven centres surveyed. Rental condominiums in Vancouver and Toronto had the lowest vacancy rate at 0.4 per cent. On the other hand, Québec and Montréal registered the highest vacancy rates for condominium apartments at 1.2 per cent and 2.8 per cent in 2006, respectively. The survey showed that vacancy rates for rental condominium apartments in 2006 were lower than vacancy rates in the conventional rental market in all the surveyed centres, except Montréal and Calgary. The highest average monthly rents for twobedroom condominium apartments were in Toronto ($1,487), Vancouver ($1,273), and Calgary ($1,257). All surveyed centres posted average monthly rents for two-bedroom condominium apartments that were higher than average monthly rents for two-bedroom private apartments in the conventional rental market in 2006.

A second enhancement starting in 2007, is that CMHC will be conducting a rental market survey in the spring, in addition to the one conducted in the fall. The results of the spring survey will be published in June and will provide centre-level information on key rental market indicators such as vacancy rates and average rents.