Posted by Moishe Alexander

“The gain in February housing starts was concentrated in the multiple starts segment, particularly in Toronto,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre.

The seasonally adjusted annual rate of urban starts increased by 9.0 per cent to 179,100 units in February. Urban multiple starts increased by 19.1 per cent to 89,900 units while single urban starts increased by 0.5 per cent to 89,200 units.

February’s seasonally adjusted annual rate of urban starts increased by 28.6 per cent in Ontario, by 14.3 per cent in Atlantic Canada, by 10.8 per cent in the Prairie region and by 8.0 per cent in British Columbia. In Quebec, the seasonally adjusted annual rate of urban starts decreased by 14.1 per cent.

Economic conditions have substantially improved since the beginning of the year, as the financial crisis is largely over. Governments’ expansionary monetary and fiscal policies allowed for the massive injection of capital that stabilized the financial markets and revitalized the economies.

In Quebec, the economy is showing signs of an imminent recovery, and GDP is expected to grow in 2010. Employment, which tends to start growing again with some lag behind the economic cycle, should pick up slowly during 2010. The number of jobs should fall by 1.3 per cent this year, which should drive up the unemployment rate to 9.5 per cent in the Montréal CMA. After having increased rapidly since the beginning of the year, the unemployment rate has been rising more slowly in the last few months, as employment has stabilized to a certain extent. Even if the worst of the job losses is now over, the labour market will remain anemic, with a small gain in jobs (+0.4 per cent) next year, which will limit income growth and housing demand. In 2010, the unemployment rate should reach 9.6 per cent.

During the period from September 2008 to September 2009, employment in the Montréal CMA declined by 1.1 per cent from the previous twelve months, as around 21,300 jobs were eliminated. The losses were concentrated in full-time jobs
( 1.3 per cent), as part-time jobs rose slightly (+0.1 per cent). As well, the job cuts particularly affected young people aged from 15 to 24 years ( 3.5 per cent) and also people aged from 25 to 44 years ( 1.3 per cent).
The financial sector has been the hardest hit by the job losses for the past year. In the midst of the crisis that shook the financial markets, the companies in this sector cut their workforces by more than 10 per cent in one year. In all, about 15,000 jobs were eliminated in this sector. The improvement of the situation on the financial markets now seems to have stemmed the hemorrhage of jobs in this sector.
A more significant sector in terms of number of jobs, trade–and more particularly retail trade–also registered considerable job losses in the last twelve months ( 7 per cent). In fact, more than 16,000 jobs were eliminated in this sector, but the situation should stabilize over the coming quarters, as economic conditions improve.

After having declined for four consecutive years, employment in the manufacturing sector seems to have stabilized in recent quarters but, with the strong Canadian dollar, the recovery in this sector remains uncertain. The slowdown of the Montréal housing market at the beginning of 2009 sharply affected employment in the construction sector, which had posted two years of solid growth. The massive investments in infrastructure will support employment in this sector in the Montréal area in 2010.

After declining significantly at the beginning of the year, the Montréal census metropolitan area (CMA) housing market has been showing signs of picking up for the past few months. This increase in activity on the housing market is coinciding with an improvement in economic conditions, as several indicators are suggesting that economic growth will soon resume. In this environment, the housing market will be relatively stable in 2010, for both residential construction and resale activity.

Economic conditions have substantially improved since the beginning of the year, as the financial crisis is largely over. Governments’ expansionary monetary and fiscal policies allowed for the massive injection of capital that stabilized the financial markets and revitalized the economies.

In Quebec, the economy is showing signs of an imminent recovery, and GDP is expected to grow in 2010. Employment, which tends to start growing again with some lag behind the economic cycle, should pick up slowly during 2010. The number of jobs should fall by 1.3 per cent this year, which should drive up the unemployment rate to 9.5 per cent in the Montréal CMA. After having increased rapidly since the beginning of the year, the unemployment rate has been rising more slowly in the last few months, as employment has stabilized to a certain extent. Even if the worst of the job losses is now over, the labour market will remain anemic, with a small gain in jobs (+0.4 per cent) next year, which will limit income growth and housing demand. In 2010, the unemployment rate should reach 9.6 per cent.

During the period from September 2008 to September 2009, employment in the Montréal CMA declined by 1.1 per cent from the previous twelve months, as around 21,300 jobs were eliminated. The losses were concentrated in full-time jobs
( 1.3 per cent), as part-time jobs rose slightly (+0.1 per cent). As well, the job cuts particularly affected young people aged from 15 to 24 years ( 3.5 per cent) and also people aged from 25 to 44 years ( 1.3 per cent).
The financial sector has been the hardest hit by the job losses for the past year. In the midst of the crisis that shook the financial markets, the companies in this sector cut their workforces by more than 10 per cent in one year. In all, about 15,000 jobs were eliminated in this sector. The improvement of the situation on the financial markets now seems to have stemmed the hemorrhage of jobs in this sector.
A more significant sector in terms of number of jobs, trade–and more particularly retail trade–also registered considerable job losses in the last twelve months ( 7 per cent). In fact, more than 16,000 jobs were eliminated in this sector, but the situation should stabilize over the coming quarters, as economic conditions improve.

After having declined for four consecutive years, employment in the manufacturing sector seems to have stabilized in recent quarters but, with the strong Canadian dollar, the recovery in this sector remains uncertain. The slowdown of the Montréal housing market at the beginning of 2009 sharply affected employment in the construction sector, which had posted two years of solid growth. The massive investments in infrastructure will support employment in this sector in the Montréal area in 2010.

Potential buyers were asked to rank their top incentives for purchasing a first property. While home prices and interest rates took the number one and two rankings, respectively, the third most popular incentive was the First-Time Home Buyers’ Tax Credit. The recently introduced Home Renovation Tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as either ‘very likely’ or ‘somewhat likely’ to impact their purchasing decision.

“When first time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt.  Without significant volumes of entry-level homes trading hands, the entire market limped through the winter months.   First time buyers are back in force this spring, and with them the beginnings of a market recovery.  While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Our survey demonstrates how important affordability factors such as interest rates and house prices are in stimulating demand.”

Across the country, potential first-time homebuyers agreed that affordability was their top consideration, however the survey also revealed differences amongst buyers in various regions of Canada. In provinces such as British Columbia where high housing prices have kept some buyers out of the market in recent years, 92 per cent of potential first-time buyers are now motivated by low interest rates and 96 per cent say lower home prices are likely to prompt them to buy.

In Atlantic Canada, where local economies have been resilient in the face of a worldwide recession and housing markets remain stable, 43 per cent of first-time buyers say they that job security is a factor in their decision to buy, while 84 per cent of buyers in British Columbia and Alberta said job security will influence them.

Atlantic Canadians were less motivated than other Canadians by declining interest rates, with only 72 per cent saying it will likely prompt a buying decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying decision, compared to the Canadian average.

Mr Soper continued, “The significant response differences from region to region show how closely the residential real estate market is tied to broader economic trends and consumer confidence. Buying your first home is a major life decision, and people are more likely to purchase a home if they feel comfortable about the state of the economy and confident that they will have a job to support their new mortgage obligation.”

Top Incentives for First-Time Buyers across Canada
Potential first-time buyers were asked to choose their number one incentive for purchasing a first property. The table shows the percentage of respondents who selected each factor as their top incentive.

REGIONAL SUMMARIES

Atlantic
Overall activity in the housing market has remained steady in the Atlantic region with first-time homebuyers continuing to enter the market.  Low interest rates and recent government incentives, such as the Home Renovation Tax Credit, greater RSP deduction limits and the First-Time Homebuyer’s Tax Credit speak to affordability.  Buyers in this area are entering the market that would not have a few years ago, due to these influencing factors. Entry-level buyers in Newfoundland, Prince Edward Island, New Brunswick and Nova Scotia continue to search for detached bungalows, with the average price ranging from $157,000 in Charlottetown to $215,667 in Halifax during the first quarter of 2009.

Quebec
First-time buyers continue to pursue the dream of home ownership in Montreal, as the number of entrants to the housing market has remained relatively stable. Low interest rates are contributing to increased market entry with 41 per cent of first-time buyers suggesting this is the key incentive driving the purchase of their first property, followed by 13 per cent who suggest lower housing prices might influence their buying decision. With 47 per cent of new buyers in Quebec planning to settle in urban areas, buyers are planning to invest and live in their first home for ten or more years.  Fifty-six per cent of first-time buyers hope to purchase a property in the $150,000 to $300,000 price range.

Ontario
Encouraged by recent government initiatives, home ownership in Ontario is becoming a reality for an increasing number of younger purchasers.  Across Ontario, 36 per cent of potential first-time buyers are most likely to purchase property in an urban setting.  Condominiums continue to attract first-time buyers in the Greater Toronto Area with urban communities at accessible price points appealing most to market newcomers. In addition to affordability, location is a leading factor dictating condominium appeal. Neighbourhoods in Toronto’s east and west downtown core are popular with first-time buyers. In Ottawa, affordability continues to drive activity and most first-time buyers are opting to purchase in suburban areas where properties typically cost $50,000 to $75,000 less than in the city centre. Active first-time buyer markets include Orleans, Barrhaven and Kanata.

Manitoba & Saskatchewan
Thirty per cent of Prairie buyers planning on purchasing their first home in the next three years will choose a detached bungalow. The second-most popular choice for first-time buyers is condominiums at 21 per cent, followed by detached two-story homes at 15 per cent. In Winnipeg, up-and-coming neighbourhoods for first-time buyers include River Heights – which has traditionally been attractive for people entering the market – Fraser’s Grove and East / North Caldonin. With a good selection of older bungalows and two story homes, Broders Annex is the hottest neighbourhood for first-time buyers in Regina.

Alberta
Alberta’s urban centres continue to be popular with first-time buyers, who make up nearly a third of home sales in both Calgary and Edmonton. Condominiums and detached bungalows are the most popular choices for first-time buyers in Edmonton, where lower housing prices and low interest rates are the biggest incentives for buyers entering the market for the first time. Popular areas for new buyers include the suburbs, where a new condominium may be within budget, the university area, where many parents are buying for their kids, Allendale and McKernan. In Calgary, new buyers are most interested in inner city condominiums and detached houses in the suburbs, with many seeking new or renovated homes.

British Columbia
With home prices either flat or declining in many communities in British Columbia and with interest rates at record lows, first-time buyers are taking advantage of greater affordability, with female buyers leading the trend. Sixty per cent of the buyers getting into BC’s housing market for the first time are women. In British Columbia, 40 per cent of prospective first-time buyers intend to purchase a ‘fixer-upper’ while 80 per cent would take advantage of the Federal Government’s Home Renovation Tax Credit in making upgrades to a home. First-time buyers in Vancouver are favouring condominiums and townhomes, however an increasing number of entry-level buyers are finding affordable detached homes outside the city in the Fraser Valley suburbs.

The survey portion of the Royal LePage First-Time Homebuyers’ Report was conducted by Pollara from April 29, 2009 to May 8, 2009 among 474 first-time homebuyers in Canada. The online survey was conducted among a randomly-selected sample of 474 adult Canadians who are likely to purchase their first home in the next 3 years.  A probability sample of this size with a 100% response rate would have an estimated margin of error of +/- 4.5 %, 19 times out of 20. The data was statistically weighted to ensure the sample’s regional and age/gender composition reflects the actual Canadian population according to the most recent Census data.

http://torontorealestatetrends.com/royal-lepage-first-time-home-buyers-report/

reported by Moishe Alexander, CFC CEO

Canada Mortgage and Housing released its Spring Rental Market Report today. Highlights:

• The average apartment vacancy rate in Alberta’s urban centres increased from 2.9 per cent in April 2008 to 4.6 per cent in April 2009. All centres except Grande Prairie reported a higher vacancy rate in 2009.
• The 2009 vacancy rates ranged from a low of 1.2 per cent in Cold Lake to a high of 8.5 per cent in Grande Prairie.
• Calgary and Edmonton, the two largest urban centres, reported vacancy rates of 4.3 and 4.7 per cent, respectively.
• The provincial average rent for all unit types was $962 per month in April. At $2,088, Wood Buffalo had the highest average monthly rent amongst all urban centres in Alberta, while Medicine Hat had the lowest average rent at $654 monthly.

Brought by Moishe Alexander, CFC CEO.

All the Canadian newspapers are aflutter because the Canadian Real Estate Association released their monthly report today, with positive news. I think people tend to get over excited about these releases whether positive or negative, but, here is the gist of it.

Resales of existing Canadian homes showed continuing improvements in in May, with both the number of transactions and the national average price on the rise. The national average sale price in May hit the highest monthly level on record, at $319,757, which was up four-tenths of a percentage point from the previous record in May 2008.

The real-estate association said the dollar value of sales through its members reached $11.4 billion in May, up 10 per cent from the previous month and more than 50 per cent above the low of $7.5 billion in January.

The association said the the rebound in activity was led in some of the most expensive local markets in Canada and that had the effect up pushing the national average price upward.

Seasonally adjusted sales were up on a monthly basis in about 70% of local markets. Monthly activity gains in Toronto (9%), Calgary (25%), Montreal (10%), Vancouver (8%), and Edmonton (12%) contributed most to the overall increase in monthly activity.

“Inventory levels are still high in many markets, but fewer new listings and rising sales activity suggests that the selection of homes available for sale may shrink as the year progresses. The supply of homes up for sale needs to be drawn down further before average price increases become more widespread among local markets,” said CREA economist Gregory Klump.

http://www.edmontonrealestateblog.com/my_weblog/2009/06/edmonton-brings-up-the-national-average.html

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

Moishe Alexander’s Review

Highlights

Moishe Alexander says the rental apartment vacancy rate went up again in the Sherbrooke census metropolitan area (CMA). After climbing by 1.2 percentage points in 2007 to 2.4 per cent, the vacancy rate continued to increase in 2008, reaching 2.8 per cent. The rental market has been easing for five years. The estimated change in the average apartment rent was 2.1 per cent between the October 2007 and October 2008 surveys in the Sherbrooke CMA.

Higher vacancy rate in 2008

Moishe Alexander says According to the results of the latest CMHC Rental Market Survey conducted in 2008, the rental apartment vacancy rate1 went up again in the Sherbrooke census metropolitan area (CMA). After climbing by 1.2 percentage points in 2007 to 2.4 per cent, the vacancy rate continued to increase in 2008, reaching 2.8 per cent. As shown in Figure 2, the rental market has in fact been easing for five years.

In the other CMAs across the province, the vacancy rate increased only in the Trois-Rivières area (from 1.5 per cent in 2007 to 1.7 per cent in 2008). The vacancy rates fell in the Montréal CMA, the Gatineau area and the Saguenay CMA, to 2.4 per cent, 1.9 per cent and 1.6 per cent, respectively, for decreases of 0.5, 1.0 and 1.2 percentage points. It was in the Québec area, however, that the market was the tightest, with fewer than 1 per cent of the apartments vacant there.

Supply remains stable but demand moderates

Moishe Alexander says The vacancy rate increase in the Sherbrooke CMA in 2008 resulted from a moderating demand and stable supply. The number of units in the rental housing stock dropped by 6 per cent in the CMA (from 32,891 units in 2007 to 30,842 units in 2008), but this decrease was mainly caused by the withdrawal of retirement home apartments from our 2008 survey universe. Given this change, supply effectively remained fairly stable between 2007 and 2008 (-1 per cent). At first glance, the stability of the rental housing universe may seem surprising. In fact, between our October 2007 and October 2008 surveys, just over 300 traditional rental apartments were completed, which should normally have increased supply on the market. However, as mentioned earlier, the rental housing stock decreased by 300 units.

This does not necessarily mean that there were fewer rental units on the market this year than last year. It is possible that a number of buildings had to be temporarily withdrawn from the survey universe, as they contained fewer than three rental units. This can occur when one of the apartments in a three-unit building is occupied by the owner.  On the demand side, migrants who come to an area, whether from other areas of Quebec or elsewhere, are definitely one of the main factors. In fact, most newcomers to an area choose to rent when they arrive.

Preliminary data2 show that fewer immigrants planned to settle in the Estrie area in 2008. At the end of the first half of 2008, the data showed a decrease of 7 per cent compared to the same period in 2007 (about 40 fewer people). Should the data turn out to be accurate, the decline in immigration in 2008 could therefore be partly responsible for the increase in the vacancy rate this year.  In addition, still attracted by the abundance of job opportunities out West, people from Sherbrooke may have continued to move there, lowering net migration in the CMA and weakening potential demand for rental units.
Another factor that may have contributed to the rise in the vacancy rate is the fact that the labour market has been less favourable to young people since the end of 2007, which may have caused some of them to delay leaving the family home, further moderating demand for rental apartments.

Impact of homeownership

Moishe Alexander says As we have already mentioned, the proportion of vacant rental units has been increasing for a few years now in the Sherbrooke CMA. In recent years, sales of existing and new homes have remained strong, suggesting that many renter households made the transition to homeownership, which therefore pushed up the vacancy rate.

In fact, young households now account for a slightly smaller share of rental market clients, as indicated by the 2001 and 2006 census data. It is likely that a greater number of young households are now moving straight to homeownership and bypassing the rental market, also contributing to driving up the vacancy rate. While there are no data to confirm or refute this hypothesis, many younger people may have been attracted to buying homes, such as condominiums, which are more affordable. In fact, sales of new and existing condominiums increased significantly in 2007 and 2008 in the Sherbrooke CMA. It should also be mentioned that financing conditions are still favourable to home buying, such that young households can consider becoming homeowners.

Market easing for larger units

Moishe Alexander says As was the case last year, bachelor units posted the least tight conditions on the rental market, with a vacancy rate of 4.9 per cent in 2008. As well, the market eased for apartments with three or more bedrooms, with the vacancy rate increasing by 1.4 percentage points between the last two October surveys (1.4 per cent in 2007, versus 2.8 per cent in 2008). The decrease in the number of immigrant families, often larger than families who are native to the area3, may have contributed to the increase in the percentage of unoccupied units in this category. The vacancy rate for two-bedroom apartments also rose, but to a lesser extent.

Vacancy rates up in almost all sectors of the CMA

Moishe Alexander says The vacancy rates in the west and central districts of the city of Sherbrooke increased in 2008. Having now surpassed 3 per cent in both districts. Among all the zones in the CMA, the west district posted the largest year-over-year vacancy rate increase (+1.7 percentage points). Students from the Université de Sherbrooke usually fuelled demand for rental units in that sector. While this policy had no impact last year, free public transit for students may have encouraged some to look further away from campus for an apartment that would better meet their needs. While the vacancy rate rose for all unit types combined, rental market conditions in the west district particularly eased for bachelor apartments, which are usually popular with students. In fact, the proportion of vacant units in this category jumped from 1.8 per cent to 7.9 per cent. In the former city of Sherbrooke, the east district recorded the smallest percentage of unoccupied units (1.9 per cent). In fact, it was in this district that the withdrawal of retirement home apartments from our survey universe this year had the greatest impact. In effect, by including retirement homes, the 2007 vacancy rate was much higher there. It should be recalled that our latest retirement home market survey report showed that many rental units were vacant in the east district.

The vacancy rates also increased

Moishe Alexander says year-over-year in the former suburbs of Rock Forest (from 1.2    per cent to 1.4 percent), Fleurimont (from 1.4 per cent to 2.1    per cent) and Ascot–Lennoxville (from 3.8 per cent to 5.1 per cent).  However, rental units in these sectors account for less than 25 per cent of the total rental housing stock in the CMA. Contrary to the other sectors of the CMA, the Magog area saw its vacancy rate drop to 2.9 per cent in 2008 (from 3.3 per cent in 2007). With the regional manufacturing sector experiencing difficulties, some renter families likely decided to postpone the purchase of a home. In fact, market conditions got tighter for units with three or more bedrooms, as their vacancy rate fell by 1.9 percentage points (from 4.8 per cent in 2007 to 2.9 per cent in 2008). With sales of existing singlefamily houses having fallen significantly in the area in 2008, larger apartments may have become the best compromise for renter families in the current economic environment. It is also possible that workers seeking better job prospects left the area, further moderating the rental housing demand.

Rents in 2008

Moishe Alexander says The estimated change in the average apartment rent was 2.1 per cent between the October 2007 and October 2008 surveys in the Sherbrooke CMA. Apart from onebedroom units, for which the average rent rose by 4.2 per cent, the other unit types recorded increases of around 2 per cent.  The average rent for two-bedroom apartments reached $543 while, for apartments with three or more bedrooms, the average attained $658. The average rents for bachelor apartments and one-bedroom units, for their part, rose to $368 and $437, respectively.

Older buildings bear the brunt of the easing rental market

Moishe Alexander says In the CMA, there were greater proportions of vacant units in rental structures built before 1990 (see Table 1.2.1). Buildings completed from 1960 to 1974 posted the highest vacancy rate (3.6 per cent).  Conversely, very few apartments were vacant in structures built from 1990 to 1999, which had a vacancy rate slightly above zero (0.4 per cent).

The trend observed in the last few years for smaller structures (with three to five units) continued, as they still posted the lowest vacancy rate (1.7 per cent). This result contrasted with that of residential buildings with 20 to 99 units, for which the vacancy rate was slightly below 4 per cent.

Rental affordability falls slightly

Moishe Alexander says CMHC’s rental affordability indicator4 is a gauge of how affordable a rental market is for those households which rent within that market. In 2008, the affordability indicator4 was 128, compared to 133 in 2007. While rental affordability has decreased, Sherbrooke area households continued to spend less than 30 per cent of their gross income on rent, as they have for the last ten years. In 1998, the indicator had dropped below 100, reaching 93.

In addition, a review of the data for two-bedroom apartments, which do account for over half of the rental housing stock in the CMA, reveals that affordable units remained the (from 3.3 per cent in 2007). With the regional manufacturing sector experiencing difficulties, some renter families likely decided to postpone the purchase of a home. In fact, market conditions got tighter for units with three or more bedrooms, as their vacancy rate fell by 1.9 percentage points (from 4.8 per cent in 2007 to 2.9 per cent in 2008). With sales of existing singlefamily houses having fallen significantly in the area in 2008, larger apartments may have become the best compromise for renter families in the current economic environment. It is also possible that workers seeking better job prospects left the area, further moderating the rental housing demand.

Rents in 2008

Moishe Alexander says The estimated change in the average apartment rent was 2.1 per cent between the October 2007 and October 2008 surveys in the Sherbrooke CMA. Apart from one bedroom units, for which the average rent rose by 4.2 per cent, the other unit types recorded increases of around 2 per cent.  The average rent for two-bedroom apartments reached $543 while, for apartments with three or more bedrooms, the average attained $658.  The average rents for bachelor apartments and one-bedroom units, for their part, rose to $368 and $437, respectively.

You can find the entire report in PDF format through the following link:

http://www.cmhc-schl.gc.ca/odpub/esub/64447/64447_2008_A01.pdf

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

Highlights

Moishe Alexander says After remaining unchanged for three years at 2.8 per cent, the overall vacancy rate in October 2008 fell to 2.4 per cent. Little new construction and fewer renters moving to homeownership led to the market tightening. The rental market tightened for both small and large apartments. Rents for townhouses and apartments surveyed in both 2007 and 2008 grew by 2.3 per cent, similar to the rate of inflation.

Demand

Drop in Peterborough Vacancy Rate

Moishe Alexander says After holding steady for the past three years at 2.8 per cent, the vacancy rate for privately initiated apartments in buildings of three units or more in the Peterborough Census Metropolitan Area (CMA) dropped to 2.4 per cent in October 2008. The decline was due to an increase in demand.

Moishe Alexander says Demand for rental acommodation has been affected by the decreased demand for homeownership resulting from recent price appreciation, and some moderation in the labour market, particularly for youth.

Few Renters Moving to Homeownership

Moishe Alexander says The main reason the rental market tightened was that fewer renters became first time buyers. The movement into the rental market by youth and other households slowed, but not as much as the movement of renters into home ownership. Because of the appreciation of home prices in the existing home market, some prospective buyers have delayed a move to ownership. Owning has become less attractive, even for families with children, so some families are waiting for the market to become more accessible before they become homeowners. As a result, the vacancy rate  decreased, especially for three bedroom apartments.

Weaker Employment Offsets Demographic Support for Rental Demand

Moishe Alexander says Although the number of youth increased, their movement into the rental market has slowed. The population aged between 15 and 24, an age group typically associated with rental demand and household formation, increased from about 13.5 per cent of the population to about 15 per cent between the 2001 and 2006 census in Peterborough CMA.  At the job market level, service sector employment is growing. Overall part time employment has increased much faster than full time employment, although both are increasing. However, among 15 to 24 year olds, a sharp decrease in part-time employment offset the gains in full-time employment in 2008 and total employment was down. Given the labour market moderation, fewer youth moved out of their parental homes into rental accommodations.

More Rental Demand for Large and Small Size Units

Moishe Alexander says Less movement towards ownership is tightening the market for threebedroom apartments. The vacancy rate edged down to 1.4 per cent from 3.5 per cent in October 2007, while the supply increased by 37 units. Bachelor units showed the same trend. The vacancy rate for these smaller units fell to 1.5 per cent from 3.7 per cent. This decline is a result of an increase in demand which was greater than the supply increase. Bachelor apartments make up 3.2 per cent of the total rental universe. With this small portion, any change in vacancies can have a substantial impact on the vacancy rate for this segment.

For two-bedroom apartments, demand did not change significantly from last year. Changes in both demand and supply led to a drop in the vacancy rate from 2.7 per cent to 2.3 per cent.

Vacancy Rates in Older Buildings Decline

Moishe Alexander says Demand has shifted to older buildings which account for 17.6 per cent of the total stock of rental housing.  The vacancy rate in older buildings built in 1940 and before decreased from 5.8 per cent in October 2007 to 1.8 per cent in October 2008.  These buildings offer spacious units at lower rents. The average rent in this building segment is $674, compared to $858 for newer buildings and in particular those built after 1990. The vacancy rate in buildings built after 1990 started to trend up and reached 2.4 per cent in October 2008 from 1.7 per cent last year.

Apartments With Lower Rents in High Demand

Moishe Alexander says Despite the popularity of high end apartments, affordable rental units have become increasingly attractive.  The demand for apartments with rents between $600 and $699 has jumped up. The vacancy rate fell to two per cent from the 3.5 per cent registered in 2007. The vacancy rate for units with rents in excess of $1,000 moved down from 0.9 in 2007 to 0.7 in 2008.

Slight Decline in Availability

Moishe Alexander says The availability rate is the percentage of apartments that are either vacant or for which the existing tenant has given or has received notice to move out and for which a lease has not been signed by a new tenant. The availability rate indicates the percentage of apartments available to market to prospective tenants. In line with the vacancy rate, the availability rate for townhouses and apartments fell to 4.2 per cent this year, down from the 4.5 per cent registered in 2007. There were relatively fewer bachelor, one bedroom and three bedroom apartments available for rent in October 2008. In contrast, the availability rate for two bedroom apartments rose to 4.4 per cent in October 2008 from 3.8 per cent in the same period last year.

Softer Demand for Townhouses

Moishe Alexander says Demand for townhouses decreased in contrast to 2007 when it had increased. The vacancy rate went up to 2.8 per cent from 2.2 per cent in October 2007. Last year’s tighter demand for this type of dwelling pushed the rents up by 4.5 per cent and consequently made them less attractive this year.

Rent Increase Steady

Moishe Alexander says CMHC measures annual changes in average rents based on a method that compares rental structures that were common to both the 2007 and 2008 surveys. By eliminating the impact of structures coming into or being removed from the rental market universe, rent fluctuations due to changes in market conditions can be analyzed.

Moishe Alexander says Despite the lower vacancy rates, the growth in average rent for townhouses and private apartments was unchanged at 2.3 per cent, in line with the increase of 2.2 per cent of the consumer price index excluding gasoline in the 12 months to September of 2008. However, this rate is above the Residential Tenancies Act Guideline for 2008 of 1.4 per cent. Rent increases ranged from two per cent for two-bedroom units to 5.4 per cent for bachelors. Since bachelors account for less than four per cent of the rental stock, the high increase did not have much impact on the total average rent change.

Rental Market Outlook

Moishe Alexander says Appreciation of house prices and an increase in part time employment have made renting the preferred option for many households. A combination of slow ownership demand and low rental construction will push the vacancy rate down further in 2009.  Consequently, the overall vacancy rate is expected to drop down to 2.2 per cent in October 2009 from 2.4 in 2008 and at the same time the rent for a two-bedroom apartment will inch up to $870.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/65776/65776_2008_A01.pdf