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Moishe Alexander’s review of the Windsor Rental Market and CMHC Outlook Report Fall 2008

February 24, 2009 – Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting the Windsor Rental Market

Moishe Alexander’s Review

Highlights

Moishe Alexander says the average vacancy rate in the Windsor CMA rose to 14.6 per cent in October 2008, up from 12.8 per cent last fall. Unemployment among young persons and residents leaving to search for work elsewhere contributed to the increase. The average rental apartment vacancy rate will remain high in 2009, peaking at 17 per cent.

Demand for Rental Apartments Waned in 2008

Moishe Alexander says Demand for privately-initiated rental apartment units in the Windsor Census Metropolitan Area (CMA), waned in 2008. The already high vacancy rate increased to a record 14.6 per cent from 12.8 per cent in 2007. Vacancy rates were unchanged or higher for all apartment types. A number of factors have contributed to the rising number of vacant rental apartments in Windsor.
Migration is a key factor in housing demand. Low unemployment rates draw migrants to a centre in search of work. Windsor’s unemployment rate has been well above the provincial average over the last four years. In 2007, Windsor averaged 9.3 per cent unemployment.  In 2008 the rate has exceeded 10 per cent in some months.

Not only has this poor employment scenario meant fewer people are moving to Windsor, it has also meant Windsor residents are moving elsewhere in search of work. In 2007, the Windsor CMA lost an estimated 1,700 people to other centres.

Employment among young people is another important factor in rental demand since they tend to be more likely to rent than other age groups.  This group has not been spared from job losses in the area. At the same time, Statistics Canada has found a growing trend of young adults staying in the parental home longer.

The resale market currently favours buyers since prices are declining.  However, fewer renters are choosing to take advantage of these conditions due to uncertain employment prospects.  For example, the rent for a three-bedroom townhouse averaged $875 in October 2008, an amount which would easily allow for a monthly mortgage payment on a starter home in Windsor. Nevertheless, the total vacancy rate for townhouse units decreased from 13.7 per cent in 2007 to 11.7 per cent in 2008, indicating tenants were not moving into homeownership.

Vacancies Highest Downtown

Moishe Alexander says All four zones in Windsor City had a higher vacancy rate in 2008 due to fewer employment opportunities, outflows of residents to other regions in search of employment.
Downtown Windsor, Zone 1, had the highest vacancy rate in the CMA once again, increasing from 15.4 per cent the previous year to 17.5 per cent in 2008 . The vacancy rate increased for all apartment types. Zone 1 has traditionally had the highest vacancy rate of any Windsor zone in part due to the large proportion of older structures which often require more repairs and therefore may be considered less desirable by potential tenants.

The core has also experienced the loss of a number of commercial businesses implying fewer people will need to live there to be close to their work. The downtown is also the prime nightlife destination which may deter some potential renters who dislike the associated noise and traffic congestion.  The vacancy rate for one bedroom apartments was highest in Zone 2 at 23.2 per cent. This zone has a number of smaller buildings primarily one bedroom. Smaller buildings, such as those with less than 20 units tend to have higher vacancies during periods of oversupply as tenants have options and preferences for larger buildings which tend to have more security, and professional onsite management. Rents for one bedroom units in this zone remain low in an attempt to compensate.

Traditionally in Windsor the most popular location for renters to choose is Zone 3-East Outer which had the lowest overall vacancy rate in the City at 10.6 per cent, as well as the lowest one bedroom vacancy rate at 9.5 per cent. The latter was significantly lower than the one bedroom vacancy rates in surrounding zones. This zone includes larger buildings with prime locations along the river which are more attractive to tenants. These buildings offer newer units and professional on-site management. As well the larger property management firms have the resources available to offer rental incentives which many smaller landlords do not.

Both the University of Windsor and St. Clair College are located in Zone 4.  Although students are usually a source of demand for rental accommodation, the vacancy rate rose from 14.5 per cent to 14.9 per cent at the same time as the stock of apartments decreased. The completion of several new student residences over the past few years coupled with students doubling up as evidenced by the decrease in the two bedroom vacancy rate have contributed to the greater number of vacancies.

Demand for One- Bedroom Apartments Falls

Moishe Alexander says Despite a decline in the stock of onebedroom apartments, the number of vacant units rose from 1,023 units in 2007 to 1,175 in 2008 resulting in a 15.7 per cent vacancy rate. With an average difference of $127 between a one-bedroom and a two-bedroom unit, some renters would have chosen to double up and share expenses. At the same time, for people in a stable employment situation, the current situation offered an opportunity to move up to a larger apartment. Given the generally weak employment situation, there were few new tenants to move into the vacated smaller units.

Rents Stable

Moishe Alexander says CMHC has introduced a measure for the change in rents for existing structures. By focusing on existing structures, we can exclude the impact of new structures added to the rental universe between surveys and conversions and get a better indication of the rent increase in existing structures. For the Windsor CMA, a softer rental market has meant that the average rent for a two-bedroom apartment unit in an existing structure showed no significant change from October 2007 to October 2008. Landlords attempting to boost occupancy rates have held the line on rents in this very competitive market.

Newer Buildings Have Lower Vacancies

Moishe Alexander says Buildings constructed pre-1960 had the highest vacancy rate at 21.6 per cent in 2008. These buildings tend to be walk-up units near the core and in need of greater maintenance. The rates for buildings constructed in 1990 and after had the lowest vacancy rate at 10.2 per cent.

Larger Buildings Have Lowest Vacancy Rate

Moishe Alexander says The trend for larger buildings to have vacancy rates below the market average in Windsor continued in 2008.  Large buildings with 100 or more units had the lowest one bedroom and second lowest two-bedroom vacancy rates despite having the highest average rents. Larger buildings are usually run by property management firms who can afford rental incentives, security, on-site superintendents and building maintenance to keep and attract tenants. These buildings also tend to have choice locations along the river in Windsor.

Smaller buildings with less than 20 units continue to have the highest vacancies for apartments with one, two and three or more bedrooms.

Availability Rate Rises

Moishe Alexander says CMHC’s availability rate measures the percentage of units for which the existing tenant has given or received notice to move and a new tenant has not been found for the unit. The rate also includes those units that are currently empty or vacant and as such the availability rate is always higher than the vacancy rate. Availability rates give a slightly broader indication of the trends in the available rental supply.

High availability rates indicate that the movement from rental to homeownership continues, although it is not as strong as in the past. It also indicates that with the numerous vacant units available, renters are easily able to move among units if a better unit becomes available. For the Windsor CMA, the availability rate increased from 14.4 per cent in October 2007 to 16.8 per cent in October 2008. The difference between the vacancy rate and the availability rate stands at 2.4 per cent in the Windsor CMA. The higher availability rate suggests that turnover among tenants has been relatively high.

Rental Affordability

Moishe Alexander says The rental affordability indicator is a gauge of how affordable a rental market is for those households which rent within that market. A generally accepted rule of thumb for affordability is that a household should spend less than 30 per cent of its gross income on housing. The new rental affordability indicator examines a three-year moving average of median income of renter households and compares it to the median rent for a two-bedroom apartment in the centre in which they live. More specifically, the level of income required for a household to rent a median priced two-bedroom apartment, using 30 per cent of its income, is calculated. The threeyear moving average of median income of households in a centre is then divided by this required income.  The resulting number is then multiplied by 100 to form the indicator.  An indicator value of 100 indicates that 30 per cent of the median income of renter households is necessary to rent a two-bedroom apartment going at the median rental rate. A value above 100 indicates that less than 30 per cent of the median income is required to rent a twobedroom apartment, conversely, a value below 100 indicates that more than 30 per cent of the median income is required to rent the same unit. In general, as the indicator increases, the market becomes more affordable; as the indicator declines, the market becomes less affordable.
According to CMHC’s new rental affordability indicator which moved from 86 in 2007 to 93 in 2008, affordability in Windsor’s rental market improved for the fourth year in a row.

Rental Market Outlook

Moishe Alexander says The average rental apartment vacancy rate will remain high in 2009, peaking at 17 per cent. A moderating economy will dampen both rental and ownership demand. Continuing out-migration, especially of the prime renter 18-24 year old age group, from the Windsor area in search of job opportunities will contribute to the surplus of vacant apartments. Employment levels will begin to slowly improve towards the end of 2009 as construction of the new $1.5 billion border crossing gets under way. Rent increases will be virtually nonexistent as landlords try to maintain rents on paper and offer other incentives to keep and attract tenants.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64407/64407_2008_A01.pdf

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Moishe Alexander’s review of the Regina CMA Rental Market and CMHC Outlook Report Fall 2008

February 23, 2009 — Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting the Regina CMA Rental Market

Moishe Alexander’s Review

Highlights

Moishe Alexander says the average vacancy rate in Regina’s rental apartments was 0.5 per cent in October 2008, down from the 1.7 per cent in October 2007. Regina tied with Vancouver and Victoria for the second lowest vacancy rate in Canada. Average rent for all types of suites increased $87 monthly between surveys. One-bedroom suites increased $80 monthly and two-bedroom suites went up $95 monthly. Three-bedroom plus apartments increased $116 monthly. The average vacancy rate for Regina will increase to 1.2 per cent in 2009 as in-migration slows because of a slower increase in employment and rising rents.

NATIONAL VACANCY RATE DECREASED IN OCTOBER 2008

Moishe Alexander says The average rental apartment vacancy rate in Canada’s 34 major centres decreased to 2.2 per cent in October 2008 from 2.6 per cent in October 2007. The centres with the highest vacancy rates in 2008 were Windsor (14.6 per cent), St.  Catharines-Niagara (4.3 per cent), and Oshawa (4.2 per cent). On the other hand, the major urban centres with the lowest vacancy rates were Kelowna (0.3 per cent), Victoria (0.5 per cent), Vancouver (0.5 per cent), and Regina (0.5 per cent). Demand for rental housing in Canada increased due to high migration levels, youth employment growth, and the large gap between the cost of homeownership and renting. Rental construction and competition from the condominium market were not enough to offset growing rental demand. The highest average monthly rents for two-bedroom apartments in new and existing structures were in Calgary ($1,148), Vancouver ($1,123), Toronto ($1,095), and Edmonton ($1,034), followed by Ottawa ($995), Kelowna ($967), and Victoria ($965). The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Trois-Rivières ($505), Saguenay ($518), and Sherbrooke ($543). Year-over-year comparison of rents in new and existing structures can be slightly misleading because rents in newly-built structures tend to be higher than in existing buildings. However, by excluding new structures, we can get a better indication of actual rent increases paid by most tenants. The average rent for two bedroom apartments in existing structures increased in all major centres. The largest rent increases in existing structures were recorded in Saskatoon (20.3 per cent), Regina (13.5 per cent), Edmonton (9.2 per cent), and Kelowna (8.4 per cent).  Overall, the average rent for twobedroom apartments in existing structures across Canada’s 34 major centres increased by 2.9 per cent between October 2007 and October 2008.
CMHC’s October 2008 Rental

Moishe Alexander says Market Survey also covers condominium apartments offered for rent in Calgary, Edmonton, Montréal, Ottawa, Québec, Regina, Saskatoon, Toronto, Vancouver, and Victoria. In 2008, vacancy rates for rental condominium apartments were below one per cent in four of the 10 centres surveyed. Rental condominium vacancy rates were the lowest in Regina, Toronto, Ottawa, and Vancouver. However, Calgary and Edmonton registered the highest vacancy rates for condominium apartments at 4.0 per cent and 3.4 per cent in 2008, respectively.  The survey showed that vacancy rates for rental condominium apartments in 2008 were lower than vacancy rates in the conventional rental market in Ottawa, Regina, Saskatoon, and Toronto. The highest average monthly rents for two bedroom condominium apartments were in Toronto ($1,625), Vancouver ($1,507), and Calgary ($1,293). 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 2008.

REGINA RENTAL MARKET SURVEY

Regina average vacancy 0.5 percentage points

Moishe Alexander says Canada Mortgage and Housing Corporation (CMHC) conducted a rental market survey in October 2008 and found the average vacancy rate in Regina’s rental apartments was 0.5 per cent, down 1.2 percentage points from 1.7 per cent in the October 2007 survey. In comparison to other Census Metropolitan Areas, Regina tied with Vancouver and Victoria for the second lowest vacancy rate in Canada. The survey found that no more than 16 vacant suites existed in any rental survey zone. As a whole, the city and surrounding areas had 52 vacant suites in the survey universe at the time the rental market survey took place.

The decline in the average vacancy rate is attributable to increased inmigration stemming from positive job growth. The rising gap between the cost of home ownership and renting through 2007 and the early part of 2008 also kept demand strong for rental accommodation. Most survey zones recorded a decline in the vacancy rate with only the East and Northeast zones experiencing a slight increase in the rate. All survey zones recorded an average vacancy rate less than one per cent. The Central zone recorded a decline of 2.8 percentage points in the average vacancy rate, the largest decline seen in the city comparing the October 2007 results to the 2008 survey. The East and West zones tied for the highest vacancy rate of 0.8 per cent, though this represents less than 10 vacant suites in each of these zones.  The average vacancy rate is up slightly in the East zone and down 1.5 percentage points in the West. Regina South (Wascana and University) recorded an average rate of 0.1 per cent, the lowest average vacancy rate in the city. The survey found one vacant suite in a survey universe of over 1,000 suites. As the name suggests, projects in this zone benefit from the demand created by students attending the university and Saskatchewan Institute of Applied Science and Technology (SIAST). Employees of these two institutions also contribute to rental demand.

Among suite types, the October 2008 survey found that vacancy rates ranged from 0.3 per cent in one-bedroom suites and 1.2 per cent in bachelor and three-bedroom suites. The average vacancy rate is traditionally higher in bachelor suites, as they are less in demand due to their smaller size. One reason for the higher average vacancy for threebedroom suites may be that rent has increased to the point that some rental households have moved to ownership. Notwithstanding the increase in the average vacancy rate, vacant suites are still scarce for these three bedroom suite types.  The survey report features information on the availability of suites within a rental market. A rental unit is available if the unit is vacant, or the existing tenant has given or received official notice to move and a new tenant has not signed a lease. As the definition of availability includes vacant units, the availability rate will always be equal to or greater than the vacancy rate.  Results of the survey indicate that the availability rate was 1.2 per cent, 1.3 percentage points lower than the average availability rate reported in October 2007.

Average rents increase $87 monthly

Moishe Alexander says Average rent for all types of suites increased $87 monthly between survey periods. One-bedroom suites increased $80 resulting in average rent of $634 monthly. Two-bedroom suites escalated $95 to arrive at a monthly average rent of $756.  Three-bedroom plus apartments increased $116 monthly resulting in average monthly rent of $908. The higher than average increase in rent for three-bedroom plus suite types may have contributed to the increase in vacancy. Turning to individual zone results for all types of suites, the largest increase in nominal rent of $137 monthly occurred in East survey zone projects. This zone contains the smallest number of suites in the survey universe. Moreover, it features the largest number of three-bedroom suites, a rare housing form considered desirable by renters due to the size of these suites. These two factors have led to an increase in average rent and resulted in this zone recording the highest average rent for all types of suites.
Regina’s Northwest zone saw the highest average rent for onebedroom apartments at $749 monthly. Projects tend to be newer in this zone and command higher rents. Central Regina recorded the lowest average rent at $587.

Buildings in this zone tend to be older and the suites smaller than in other zones. Census data confirms that household income is the lowest in the city. These suites would appeal to one-person renter households suggesting that household income would be even lower than the average. This limits the potential for higher rental rates.

CMHC’s measure of estimating the growth in rents for a fixed sample of structures is based on structures common to the survey sample for both the 2007 and 2008 surveys.  The measure aims at better understanding rent changes in existing structures by excluding from the calculation the rents of newly built apartment buildings. The methodology section at the end of this report provides detailed information on this measure. For the Regina CMA, the year-over-year gain in average rent from the fixed sample is 13.8 per cent for all types of apartments in all zones. Both onebedroom suites and two-bedroom apartments experienced a 13.5 per cent gain.

Private rental market supply declines

Moishe Alexander says The attraction of homeownership relative to renting in recent years as well as other important factors has had the effect of reducing the size of Regina rental market. According to Census data, rental units declined as a proportion of total dwellings between 2001 and 2006. While the number of private dwellings increased by 4.7 per cent, the number of rental dwellings declined by 1.4 per cent. CMHC’s annual Rental Market Survey shows that the Regina privately initiated rental universe declined by 220 units between 2007 and 2008 because of rental unit conversion to condominiums, closure for renovations or demolition. Furthermore, there have been no additions to the private rental stock in the form of housing starts over the last year.

Rental Affordability Indicator

Moishe Alexander says According to CMHC’s rental affordability indicator, affordability in Regina’s rental market declined this year. The cost of renting a median priced two-bedroom apartment climbed 17 per cent in 2008, while the median income of renter households grew at 5.4 per cent.  The rental affordability indicator in Regina stands at 93 for 2008, the lowest level of affordability on record.

RENTAL MARKET OUTLOOK

Average vacancy rate to rise in 2009

Moishe Alexander says The average vacancy rate for Regina will increase to 1.2 per cent in 2009 as in-migration slows because of a slower increase in employment and rising rents. Renters are doubling up in order to compensate for rising rents thus contributing to the increase in vacancy. In addition, newer, investor-owned condominiums are drawing off demand from existing rental projects Furthermore, Regina’s resale market is experiencing an increase in supply and price increases have slowed. This situation should persist until late 2009 and will lead to more rental households moving to homeownership as the difference in cost between owning and renting slows its rate of increase. Average rents for two bedroom suites in the city will increase to $855 monthly in 2009 due to low vacancies. In addition, rents will increase to compensate for operating and maintenance cost increases experienced in previous years.

CONDOMINIUM AND OTHER SECONDARY RENTAL UNITS – SURVEY RESULTS

Moishe Alexander says Regina’s version of CMHC’s October Rental Market Survey, which covers private row and apartment structures with three or more units, now includes information on rental condominium apartments as well as other types of rental units in the secondary rental market. The additional information should help to provide a more complete overview of all rental markets in the Regina CMA. The methodology section at the end of this report provides more information on this Secondary Rental Market Survey.

Vacancy rate of rental condominium apartments similar to purpose built rental

Moishe Alexander says Table 4.3.1 provides information on the size of the condominium rental apartment market in Regina. Of the 2,590 condominium units sampled, 303 or 11.7 per cent were rental.  The average vacancy rate of 0.3 per cent in Regina’s rental condominium apartments was similar to the vacancy rate of 0.5 per cent for purpose – built rental. At this time, the size of the rental condominium apartment universe does not allow CMHC to determine the average rental rates for such units. The survey found 8,622 households in other secondary rental units of various forms including single and semi-detached, row and other accessory suites. Average rent for all of these types was $764. Average rent for row and semi-detached units was $768. Average rent for single-detached units was $779.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64431/64431_2008_A01.pdf

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Moishe Alexander’s review of the Saskatoon Rental Market and CMHC Outlook Report fall 2008

February 18, 2009 — Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting the Saskatoon Rental Market

Moishe Alexander’s Review

Highlights

Saskatoon, Sask. - Credit Marbla123, Flickr Creative Commons

Moishe Alexander says the average vacancy rate in Saskatoon’s private apartment buildings with three or more units increased by 1.3 percentage points to 1.9 per cent in October 2008, up from 0.6 per cent in the 2007 survey. The average monthly rental rate for all types of suites surveyed in October 2008 saw a $129 increase from the October 2007 figure, reaching $761 monthly. Our forecast is for an increase in the average vacancy rate in 2009 to two per cent in October 2009. Expect an increase of $19 in 2009 bringing the average rent for a two-bedroom suite to $860.

NATIONAL VACANCY RATE DECREASED IN OCTOBER 2008

Moishe Alexander says the average rental apartment vacancy rate in Canada’s 34 major centres decreased to 2.2 per cent in October 2008 from 2.6 per cent in October 2007. The centres with the highest vacancy rates in 2008 were Windsor (14.6 per cent), St.  Catharines-Niagara (4.3 per cent), and Oshawa (4.2 per cent). On the other hand, the major urban centres with the lowest vacancy rates were Kelowna (0.3 per cent), Victoria (0.5 per cent), Vancouver (0.5 per cent), and Regina (0.5 per cent). Demand for rental housing in Canada increased due to high migration levels, youth employment growth, and the large gap between the cost of homeownership and renting. Rental construction and competition from the condominium market were not enough to offset growing rental demand.

The highest average monthly rents for two-bedroom apartments in new and existing structures were in Calgary ($1,148), Vancouver ($1,123), Toronto ($1,095), and Edmonton ($1,034), followed by Ottawa ($995), Kelowna ($967), and Victoria ($965). The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Trois-Rivières ($505), Saguenay ($518), and Sherbrooke ($543).
Year-over-year comparison of rents in new and existing structures can be slightly misleading because rents in newly-built structures tend to be higher than in existing buildings. However, by excluding new structures, we can get a better indication of actual rent increases paid by most tenants. The average rent for twobedroom apartments in existing structures increased in all major centres. The largest rent increases in existing structures were recorded in Saskatoon (20.3 per cent), Regina (13.5 per cent), Edmonton (9.2 per cent), and Kelowna (8.4 per cent).  Overall, the average rent for twobedroom apartments in existing structures across Canada’s 34 major centres increased by 2.9 per cent between October 2007 and October 2008.
CMHC’s October 2008 Rental Market Survey also covers condominium apartments offered for rent in Calgary, Edmonton, Montréal, Ottawa, Québec, Regina, Saskatoon, Toronto, Vancouver, and Victoria. In 2008, vacancy rates for rental condominium apartments were below one per cent in four of the 10 centres surveyed. Rental condominium vacancy rates were the lowest in Regina, Toronto, Ottawa, and Vancouver. However, Calgary and Edmonton registered the highest vacancy rates for condominium apartments at 4.0 per cent and 3.4 per cent in 2008, respectively.  The survey showed that vacancy rates for rental condominium apartments in 2008 were lower than vacancy rates in the conventional rental market in Ottawa, Regina, Saskatoon, and Toronto. The highest average monthly rents for two bedroom condominium apartments were in Toronto ($1,625), Vancouver ($1,507), and Calgary ($1,293). 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 2008.

SASKATOON RENTAL MARKET SURVEY

Average vacancy rate in Saskatoon edges higher

Moishe Alexander says Canada Mortgage and Housing Corporation’s rental market survey found the average vacancy rate in Saskatoon’s private apartment buildings with three or more units increased by 1.3 percentage points to 1.9 per cent in October 2008, up from 0.6 per cent in the 2007 survey.

The increase in the average vacancy rate is attributable to the movement of first-time homebuyers to the new and resale ownership market.  Increased selection in the resale and new construction markets has facilitated this move to home ownership. Prospective first-time buyers in 2007 had faced a lack of selection in the resale market due to sellers’ or accelerating market conditions. Through much of 2007 there was less than three months of supply of listings in the resale market.

The number of active listings has increased throughout 2008. Newly constructed townhouses and other units purchased by investors for rental purposes have also provided additional competition for landlords.

This has provided renters with alternatives to the primary rental stock, further contributing to the rise in average vacancy in private apartments.
Lowest vacancy rate found in Lakeview

Moishe Alexander says the average vacancy rate for all types of suites was as high as 4.7 per cent in the Southwest survey zone and as low as 0.9 per cent in the Lakeview survey zone.

Average vacancy was one per cent or less in the Nutana and Lakeview survey zones reflecting, primarily, the desirable locations of these areas.  The neighborhoods in these areas are close to the University of Saskatchewan and have easy access to major employers.

The largest increase in the average vacancy rate occurred in the Southwest and North survey zones.  Historically, the Southwest zone has been the first to experience any general decline in rental demand.

According to Census data, neighborhoods within this zone have some of the oldest rental stock in the city and, though rents are lower than other survey zones,
renters are willing to pay a premium to move to other areas. Further, industry sources have advised that lower income individuals in this area are doubling-up in the face of rising rents.

The North is a desirable area for households finding employment in the many businesses in that sector of the city, yet the average vacancy rate increased by 2.8 percentage points since the 2007 survey.

Industry contacts inform us that many renter households have moved into homeownership or moved to investor-owned rental accommodation.

Looking at average vacancy rate by suite type, the survey found that all suite types, except bachelor suites, experienced similar average vacancy rates ranging from 1.7 per cent in three-bedroom and larger suites to 1.8 per cent for one and twobedroom suites. Bachelor suites saw an average vacancy rate of 2.3 per cent, 0.5 per percentage points higher than one and two-bedroom suites. The average vacancy rate is traditionally higher in bachelor suites.  Bachelor suites are less in demand due to their smaller size. Threebedroom suites are more popular, on average, because they are larger and make it easier to double-up comfortably, thus reducing the rent paid by each household.

Availability rate increases 1.4 percentage points

Moishe Alexander says the survey studied the availability of suites in the Saskatoon CMA in October. A rental unit is available if the unit is vacant, or the existing tenant has given or received official notice to move and a new tenant has not signed a lease. Saskatoon rental apartments surveyed saw an increase in availability in this most recent survey. The availability rate in October 2008 was 3.2 per cent, up 1.4 percentage points from the 2007 survey.

Average rents increase $129 monthly

Moishe Alexander says the average monthly rental rate for all types of suites surveyed in October 2008 saw a $129 increase from the October 2007 figure, reaching $761 monthly. These increases have occurred because of the historically low average vacancy in 2007. Record net in-migration was a key factor behind the low vacancy rate in 2007. The rising gap between the cost of home ownership and renting through 2007 and the early part of 2008 also kept demand strong for rental accommodation. Bachelor suites experienced an increase of $83 in the average monthly rent. One-bedroom suites in all zones saw their average monthly rent increase by $111 bringing them to $675 monthly.  Two-bedroom average rent grew by $148 to arrive at $841 per month.  The average rent for three-bedroom and larger suites in all zones jumped $128 to $860 monthly.

The largest increase of $158 monthly for all types of suites took place in the Lakeview survey zone.

The West and North zones experienced an increase of about $150 monthly. The Southwest survey zone saw the lowest rental increase of $100 monthly.
The survey zones with the highest monthly average rent for all types of suites were Lakeview and Northeast Saskatoon with average rents of $831 and $824 respectively. Rental housing in these neighborhoods are in high demand due to their close proximity to the University of Saskatchewan and major sources of employment.

Highest one-bedroom rents found in Central zone apartments

Moishe Alexander says at $732 monthly, the mainly highrise apartments of the Central zone featured the highest average rent for one-bedroom apartments. Two bedroom average monthly rent was highest in the Northeast zone with rent of $945 monthly. Average monthly rent of $1,163 for threebedroom suites in the Northeast zone was the highest rent found for this suite type. The lowest overall average rent was in Southwest Saskatoon at $630 monthly. One-bedroom, two bedroom and three-bedroom average monthly rents were the lowest in Saskatoon. As stated previously, the Southwest zone rental housing stock experiences lower demand due to its condition.  Tenants in these neighbourhoods are highly mobile and have lower incomes restricting rent increases, thus contributing to maintenance and quality issues. The October survey included a measure that estimates the growth in rents for a fixed sample of structures and excludes newly built properties. This measure considers structures that were common to the survey sample for both the 2007 and 2008 surveys. The aim is a better understanding of rent changes in existing structures by excluding from the calculation the rents of newly built apartment buildings. Detailed information is contained in the methodology section at the end of this report.

For the Saskatoon CMA, the percentage change of average rent within a fixed sample was close to 20 per cent for all types of suites in all survey zones. Two-bedroom apartment average rents in all areas of the Saskatoon CMA increased 20.3 per cent while the average rent for one-bedroom suites increased 19.4 per cent.

Private rental market supply declines

Moishe Alexander says the attraction of homeownership relative to renting in recent years as well as other important factors have had the effect of reducing the size of Saskatoon rental market stock. According to Census data, rental units declined as a proportion of total dwellings between 2001 and 2006. While the number of private dwellings increased by 2.5 per cent, the number of rental dwellings increased by 1.5 per cent. CMHC’s annual Rental Market Survey shows that the Saskatoon privately initiated rental universe declined by 601 units between 2007 and 2008 because of rental unit conversion to condominiums, closure for renovations or demolition. In addition, there were a number of projects converted to public housing. There have been no additions to the private rental stock in the form of housing starts over the last year although there have been some new public housing and senior’s units added.

Rental Affordability Indicator

Moishe Alexander says CMHC’s rental affordability indicator shows a decline in affordability of Saskatoon’s rental apartments. The cost of renting a median priced twobedroom apartment increased 26 per cent in 2008, while the median income of renter households grew at 5.7 per cent. The rental affordability indicator in Saskatoon stands at 92 for 2008.

RENTAL MARKET OUTLOOK

Vacancy rate forecast to increase in 2009

Moishe Alexander says CMHC is forecasting an increase in the average vacancy rate to two per cent in October 2009. Renters are doubling-up in order to compensate for rising rents thus contributing to the slight increase in vacancy. In addition, newer investorowned condominiums are drawing off demand from existing rental projects. Saskatoon’s resale market is softening and price increases have slowed. This should lead to more rental households moving to homeownership. Notwithstanding the influence of the above factors that will reduce demand, Saskatoon’s employment continues to grow encouraging inmigration and supporting rental demand. CMHC is forecasting employment gains of 2,300 jobs in 2008 followed by 1,800 in 2009.  These increases are considerably more subdued than the surge in employment seen in 2007 that saw 7,500 jobs created but the rental market will nonetheless benefit from this growth.

Rents rise at a slower pace in 2009

Moishe Alexander says competition from the home ownership market and condominium rental units will slow the pace of increase in average rents over the forecast period. Our forecast calls for an increase of $19 monthly in 2009, bringing the average rent for a two-bedroom suite to $860 by October 2009. The need to compensate for operating and maintenance cost increases experienced in previous years will be a factor behind the increase in average rents.

Condominium and other secondary rental units – Survey Results:

Moishe Alexander says the Saskatoon version of CMHC’s October Rental Market Survey, which covers private row and apartment structures with three or more units, now includes information on the secondary rental market. The additional information should help to provide a more complete overview of all rental markets in the Saskatoon CMA.

The survey considers the following types of units: rented single detached houses, rented double (semi-detached) houses, rented freehold row/town houses, rented duplex apartments, rented accessory apartments, and rented apartments that are part of a commercial or other type of structure containing one or two dwelling units. The methodology section at the end of this report provides more information on the Secondary Rental Market Survey.

The Province of Saskatchewan has recently initiated a program to encourage the creation of these types of units in private households.

Vacancy rate of rental condo apartments similar to purpose built rental

Moishe Alexander says table 4.3.1 provides information on the size of Saskatoon’s condominium rental apartment market. Of the 7,260 units condominium units sampled, 834 or 11.5 per cent were rental units. The average vacancy rate of 1.8 per cent in Saskatoon’s rental condominium apartments was similar to the vacancy rate of 1.9 per cent for purpose built rental apartments. At this time the size of the rental condominium apartment universe does not allow CMHC to determine the average rental rates for such units.

The survey found 11,766 households in other secondary rental units of various forms including single and semi-detached, row and other accessory suites.  Average rent for all of these types was $888. Average rents varied from $869 for accessory suites and $895 for row and semi-detached units. Average rent for single detached units was $890.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64443/64443_2008_A01.pdf