Rising rental pressure in Edmonton and Calgary means higher prices and lower vacancies |  Globalnews.ca

Rising rental pressure in Edmonton and Calgary means higher prices and lower vacancies | Globalnews.ca

If you’re looking for housing in Alberta’s big cities, it’s getting tougher.

Taylor Pardy, principal market analyst for the Canada Mortgage and Housing Corporation, said Alberta’s major urban centers are expected to see gradual increases in rents and decreases in vacancy rates over the next few years.

“Especially in Edmonton, we expect stronger rental demand,” he told Global News on Wednesday. “Part of the reason is the rising mortgage rate… it may lead to some people delaying their purchase decisions and perhaps staying in a rental for longer.

“Other forces in the rental market – such as stronger population growth in Alberta with variables such as interprovincial migration being more strongly positive from mid-2021 – this generally supports population growth, particularly in larger metro centres, and has historically worked together. related to decreasing vacancy rates and gradually increasing rental rates.”

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The Canadian Consumer Price Index (CPI) for July 2022 shows that the cost of buying or renting a home has increased. As mortgage costs rise with higher interest rates, the report says rent prices are accelerating, rising faster in July than the previous month.

A report released Tuesday found that the mortgage interest cost index rose year-on-year for the first time since September 2020 (up 1.7 percent) and that rents rose 4.9 percent in July compared to the same month in 2021. That rent increase came after rising 4.3 percent in June.

Ontario and Alberta had the fastest rent increases, the CPI found.

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Rishab Mehra is an international student from India who is starting classes at the University of Alberta in September. He tried to find a place to rent off campus with roommates, but he says it was really competitive and frustrating.

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“Some of them get accepted really quickly if they’re close to the university,” he said. “We all went to the place, we really liked it. I was like, ‘I need to shoot the place quickly and I’ll be back.’ When I came back there were some other people there and they had already taken the place.

“It’s been very difficult for me personally… I just hope to find a place as soon as possible.”

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He said he had to account for water and energy as well as furniture in his budget considerations.

“For an average two-bedroom apartment, it would be about $1,700 to $1,800.

“I found a good place. It was $1,500 and I was like, ‘I’m going for it,’ but utilities weren’t included… And none of the apartments are furnished.

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“I don’t know how I’m going to be able to bring all the furniture to the place and set up the whole space.”

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“It’s a push and pull between the rental market and the sales market in all the markets we track,” said Jackson Cornelius, director of Zonda Urban, formerly Urban Analytics.

“It’s largely based on affordability. I think we’re seeing a bit of a perfect storm here with the general housing supply issues playing out in… Greater Vancouver and the Greater Toronto Area, forcing people to take a second look at where they choose to live based on affordability.

“This has led to a substantial increase in interprovincial migration to Calgary and Edmonton – and across Alberta – in search of more affordable homes.

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A more restrictive housing market means fewer people will be able to own homes and rent instead, Cornelius explained, pointing to the Statistics Canada report.

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“As housing values ​​rise, you naturally push out some of the higher price-sensitive consumers. When that happens, combine that with gradually increasing interest rates, which will cause… people to stay in the rental market.

“Or sometimes it causes — if interest rates go up — people sell their homes because they can no longer pay the mortgage and move into rental units.”

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Zonda Urban’s Q2 2022 Rental Take described Calgary’s recent rental demand as “record-breaking.” Overall, average vacancy fell to 5.6 percent (down 4.5 percent year-over-year) and average rents increased 13 percent (to $2.57 per square foot).

“We’ve definitely seen an increase in activity in the rental market,” said Kendall Brown, Alberta and Ontario rental data market manager at Zonda Urban.

“Specifically in Calgary, we’ve seen the average monthly rental rate increase by about $200 a month. We are also seeing rent increases in Edmonton, not as much as in Calgary.

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In Edmonton, Zonda Urban found that overall vacancy was down 2.9 percent from this time last year to 7.9 percent, and average rents were up four percent from Q1 this year (to $1.81 per square foot).

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“This is the first time the average rent has changed since Q3 2021,” Zonder Urban’s Rent Look added.

“We’re also seeing a pullback in incentives, so that’s with rental rates going up as well,” Brown explained. “The incentives are currently around one month free on a 13-month lease, whereas in previous quarters we’ve seen up to two months free on a 12-month lease.”

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As a province, Albertans pay the most rent plus energy (heat, water and electricity) than any other province or territory, according to the Canadian Rental Housing Index.

The average rent plus utilities across all incomes in Alberta is $1,279. It’s $1,148 in BC, $1,021 in Saskatchewan, $891 in Manitoba and $1,109 in Ontario. The average monthly rent and utilities cost in Calgary is $1,355 compared to $1,264 in Edmonton, according to the CRHI database presented by the BC Non-Profit Housing Association.

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But when you compare big Canadian cities, Brown and Cornelius say Edmonton and Calgary are still more affordable than places like Vancouver and Toronto.

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“Vancouver has a vacancy rate of around one percent, so it’s definitely harder to get a rental unit in Vancouver,” Brown said. “Rental rates are over $3 a square foot, compared to $1.82 here in Edmonton and $2.57 in Calgary.”

Pardy points out that Edmonton’s vacancy rate of 7.3 per cent is still “pretty high in a historical sense” and the number of new rental units coming on the market has helped meet demand.

“Housing is typically considered affordable if a household spends less than 30 percent of its pre-tax income on rent and utilities,” CRHI said.

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Brown said rental properties, especially in inner cities, are pushing that limit.

“I’ve heard from a lot of building staff in buildings, especially in downtown Calgary, now they’re looking at 40 to 50 percent, especially when you’re looking at rents around $1,800 for a one-bedroom (apartment).

“There’s no way a 25-year-old can spend only 30 percent of his monthly income on that. Especially a young professional. There is no way to achieve 30% affordability. Which is sad because spending 50 percent of your monthly income on rent is a huge amount to spend.”

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July 2022 Reaction to the rate of inflation

July 2022 Reaction to the rate of inflation

Brown said people need to determine their priorities and where cost and location fit.

“If you wanted a more affordable unit, you could look outside the city center,” she said. “The further you are from downtown, the more accessible it is.”

But as Canadians continue to face high consumer costs — food, goods, services, travel — Cornelius says budget decisions are key.

“Over the next six to 12 months, this means tenants will have to adjust their spending habits.”

Tips for potential tenants

“I would say start looking early,” Brown said. “I would also say have all my ducks in a row. Make sure you get your previous landlord on board to give you a good review… Make sure you have everything, your deposit, ready to go as well.”

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Brown suggests casting a wider net.

“Not focusing on one specific area. Maybe look a little further. Just sign up for more than one.

“Being flexible on the move-in date also helps… If you’re looking at a 12-month lease, that would definitely help.”

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