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.

Despite a slight slowdown, activity will remain solid on the Trois-Rivières census metropolitan area (CMA) residential real estate market in 2009 and 2010. In fact, transaction volumes will stay high on the resale market, as will housing starts, which will remain above the average levels for the last few years. The rental market, for its part, will continue to post a relatively low vacancy rate. Even though the job market will be sluggish, financing conditions, which will still be very favourable, combined with strong migration, will energize the market. Job market to stay sluggish
The economy in Trois-Rivières, like in several other areas around the province, was affected by the global economic crisis that has been prevailing for over a year now. Already, the regional economy had suffered from the surging loonie, which had severely tested manufacturing companies by undermining their competitiveness on the market. The ensuing decline in demand, as a direct result of the economic slowdown, only made things worse. Consequently, job losses have now been accumulating for four quarters in the Trois-Rivières CMA (with almost all the losses having been full-time positions), in pace with the announcements of layoffs and plant closings, which have increased. On the other hand, the area will benefit from the vitality of other sectors of the regional economy, including the non-residential

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 Ottawa’s vacancy rate for apartment units fell to 1.4 per cent, the lowest level since 2001. Robust rental demand pushed up average rents faster than the rate of inflation. Increased immigration, along with slower rental construction, will lead to further tightening of the rental market in 2009.

Rental Market Survey Vacancy Results

Moishe Alexander says Rental market data released by CMHC’s latest survey confirmed that the October vacancy rate in the Ottawa Census Metropolitan Area (CMA) experienced tightening during 2008. The proportion of privately initiated apartments vacant in structures with three or more units declined to 1.4 per cent in this year, down from 2.3 per cent in 2007.  The recent level of rental market activity in Ottawa has been mostly driven by strong demand growth.  Rental demand during 2008 was sustained by a stable economy with factors such as strong young adult employment growth, rising costs of homeownership and high migration levels being particularly influential.

Factors Supporting Rental Demand

Higher Homeownership Costs

Moishe Alexander says Ottawa’s economic fundamentals are very strong. In 2008, the labour market strength was supported by a solid trend in job creation and, as a result, Ottawa’s workforce enjoys one of the highest average incomes among Canada’s major cities. However, although strong fulltime employment supports a high level of homeownership demand, record high prices and growing economic uncertainty dampen demand for ownership housing. As a result, some of Ottawa’s potential homeowners have decided to stay in their rented units and postpone their purchase intentions.

Strong Young Adult Employment

Moishe Alexander says Among the various demographic groups affecting the rental market, the young population between the ages of 18 to 24 years old has traditionally been a strong source of demand, since they usually lack the financial means to secure a mortgage.  Consequently, their success in the labour market has a crucial influence on their propensity to move out of the parental home and into the rental market.

Younger adults reached a 20-year record high level of full-time jobs, increasing by 3.8 per cent from January to September, when compared to last year. Therefore, rental demand among this age cohort has remained strong.

Increasing International Migration

Moishe Alexander says International migration flows in Ottawa have been growing at historically high rates, offsetting the weaker inter- and intra-provincial trends in recent years. During the intercensal period of 2001 to 2006, the Capital City received an all-time high annual average in-flow of six thousand immigrants. It is important to note that from arrival it takes an immigrant household between 5 to 7 years to purchase a home which implies greater rental demand.  Interestingly, Ottawa’s growing recent immigrant population was not only younger than the Canadian-born population, but was also on average more educated than their previous immigrant counterparts. Such qualities have allowed recent immigrants to perform well in the labour market, encouraging them to stay in the Capital City. This provided a boost to rental demand during 2008.

Sources of Rental Supply

Slow Rental Construction

Moishe Alexander says On the supply side, the purposebuilt rental construction trend has eased since the peak reached in 2002. The new supply of purposebuilt rental units during the first ten months of 2008 exceeded the average for the past five years only mildly, with just 142 new units built.  At the same time, apartment completions in the 12 months ending in June 2008 were up by only 11 units compared to the same period last year. Indeed, the rental apartment universe has remained virtually unchanged since 2004, which contributed to lower the vacancy rate.

Increase in Condominium Apartment Rentals

Moishe Alexander says Rental market activity in the Ottawa CMA purposed built market is increasingly competing with the supply of condominium apartments rented out by investors. Compared to last year, an additional 313 condominium apartment units were offered for rent in 2008, equivalent to an increase of 8.4 per cent. As a result, the supply of rental units within this segment has reached over 19 per cent of the growing condominium apartment universe in 2008. The total number of condominium apartments rented out comprised 6.7 per cent of the purpose-built apartment rental market supply.

Fewer Secondary Rental Market Units

Moishe Alexander says In 2008 the estimated number of households in the Secondary Rental Market declined by 2.8 per cent, with 35,433 households renting dwellings not covered by CMHC’s Rental Market Survey.1 This total number of housesholds comprises 35% of persons renting in Ottawa.The only property type that gained popularity among renters was single-detached homes, up almost 24 per cent from 2007. Although other Secondary Rental dwellings such as semi-detached, rows, and duplexes still represent 64 per cent of the market, they attracted almost 9 per cent fewer households than last year.

Apartment Rental Market

Vacancy Rate Falls to 1.4 Per Cent

Moishe Alexander says As a result of increasing demand for rental dwellings and slow rental construction, the Rental Market in Ottawa CMA experienced tightening, with widespread reductions in the vacancy rate across all apartment sizes. As well, all rental market zones experienced lower vacancy rates than last year, with New Edinburg/Manor Park/Overbrook and Westboro South/Hampton Pk/ Britannia registering the lowest in Ottawa, both with 0.7 per cent.

Rent Increases Faster than Inflation

Moishe Alexander says The fixed sample average rent in the Ottawa CMA, which effectively compares rent for apartment units surveyed both in 2007 and in 2008, increased by a solid 3.6 per cent. This increase was widespread across all bedroom types.

High Growth in Rent for 3-Bedroom Apartment Units

Moishe Alexander says A significant acceleration in rent increases was experienced by the less common, more expensive three bedroom apartment units, which grew by four per cent from last year.  Such a jump in average rents reduces the cost gap between three bedroom apartments and homeownership.

One reason behind this trend is the growing demand from households seeking a more comfortable lifestyle comparable to that of the less affordable single-family home. Among these households, we find immigrants who tend to have larger families and are more likely to live with their extended family than Canadian born households, thus requiring bigger accommodations.  The vacancy rate for this segment dropped to 1.8 per cent, down from 2.8 per cent in 2007.

Two Bedroom Apartment Rent Exceeds Inflation

Moishe Alexander says Households looking to rent a typical two-bedroom apartment during 2008 faced less choice and higher average rents than a year earlier. The vacancy rate for this apartment type tightened from 2.3 per cent in 2007 down to 1.5 per cent this year, driving the average rent up 3.7 per cent from a year ago.

Popularity of these type of apartments is driven by the fact that over 40 per cent of them are located in popular areas such as Altavista/Hunt Club, Downtown, Westboro/Hampton/ Brittania and Glebe/Old Ottawa South.

Rental Demand Stronger in Regions Close to the Core

Although most regions have been tightening steadily since the 2004 peak, the trendier and more centric regions of Sandy Hill/Lowertown, Glebe/Old Ottawa South, and New Edinburg/Manor Park/Overbrook were among the areas with stronger rental activity in 2008. These rental zones experienced a combination of lower than average vacancy and rent increases above the city average.  Interestingly, the average rent in the area of Gloucester/Cumberland remained relatively flat, even though it experienced one of the most significant drops in the vacancy rate (from 2.6 to 1.1 per cent) and had the second lowest number of units available for rent. In contrast, following previous years’ trend, the less popular area of Vanier offered the cheapest average rent and the highest rate of vacancy.

Lower Vacancy Among Newer and Bigger Structures

Moishe Alexander says Even though vacancy rates declined across all bedroom types and regions, significantly tighter conditions were experienced in trendier and more attractive segments of Ottawa’s Rental Market. Apartment units in newer structures built after 1975 were particularly popular among renters, especially those built after the turn of the century. This type of apartment saw their vacancy rate drop sharply from 2.5 per cent to 1.2 per cent in 2008 and their average rents increase by 5.7 per cent from last year.

Similarly, bigger structures were particularly attractive among households seeking better services and amenities. This was especially true for rental buildings with 100 to 199 units, which saw their vacancy rates cut significantly from last year to just 1 per cent. Thus, monthly rents increased by 4.7 per cent from last year.

Townhome Rental Market

Vacancy Contracts to 2.2 Per Cent

Moishe Alexander says Town home rental activity during 2008 gained intensity as some households seeking single-family home-like lifestyles began to move away from growing resale prices. As a result, the vacancy rate for row house rental units declined to 2.2 per cent in October 2008, down from 2.9 a year earlier.

Average Rent Posts Moderate Increase

Moishe Alexander says Although the average monthly rent for this type of dwelling stayed significantly above that for apartment units, the growth in row house average rents remained below the rate of inflation, at 1.5 per cent. Average rents for row house units tend to be less responsive than apartments to tightening conditions due to their typically dispersed location in suburban areas away from the more expensive Downtown core.

Suburban Regions Tightened the Most

Moishe Alexander says The region of Nepean/Kanata, which currently offers 49 per cent of the total row house rental universe in the Ottawa CMA, experienced substantially tighter rental conditions in 2008.  As some households seek suburban lifestyles in this increasingly popular region, stronger demand cut the number of vacant units almost in half compared to last year, driving the vacancy rate down to 1.9 per cent from 3.2 per cent in 2007 and 5.1 per cent in 2006.

However, the growth in average rent in Nepean/Kanata increased only mildly by 1.8 per cent, and was eclipsed by the jumps seen in other regions closer to the core. This was particularly true for Glebe/Old Ottawa South and Carlington/Iris, which saw growth rates in average rents of 3.4 per cent and 4.2 per cent from last year, respectively.

Condominium Apartment Rental Market

Increasing Popularity of Condominium Apartment Rentals

Moishe Alexander says Despite the increase in condominium apartment rentals, the vacancy rate for this segment remained at 0.5 per cent, steady from last year. At the same time, the average rent stood at $1,093 per month, equivalent to a 22 per cent premium over purpose-built rental apartment units. Such strong demand within the fastest growing segment in Ottawa is being fuelled by its growing popularity among young professionals and empty-nesters who value highquality building services and proximity to the core and its amenities. Not surprisingly, the vacancy rate for rented condominium apartments in buildings with 150 units or more was the lowest, at just 0.2 per cent.

Condominium Apartments Supply Differs by Regions

Moishe Alexander says Pressure for purpose-built rental accommodation in the Downtown core eased considerably since last year due to a steep rise in condominium apartment supply. The purpose-built apartment vacancy rate reached 1.6 per cent in the Downtown core, up from 0.2 per cent in 2007. The inner suburbs experienced tightening in recent years, with its vacancy rate at 0.4 per cent this year, down from 1 per cent in 2007. Such tightening was mostly due to stronger demand pressures arising from the relatively more affordable rents. The popularity of condominium apartment rental remains strong in 2008 in this region, despite the fact that renters faced on average a 20 per cent premium in rent for a two-bedroom condominium apartment, over regular two bedroom rental apartments.

In contrast, the outer suburbs proved to be the preferred area for growth in condominium apartment rentals.  Although these regions saw the fastest yearly supply growth of 14.4 per cent, strong demand resulted in the lowest vacancy rate of 0.1 per cent, down from the already low 0.2 per cent. A relatively lower monthly rent in exchange for suburban lifestyles was an influential factor among renters, who faced an average rent of $940 for a two bedroom condominium apartment or 1 per cent above that of purpose-built rental units.

Affordability Indicator

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 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. In general, as the indicator increases, the market becomes more affordable. This indicator is further explained in the Methodology section of this report.

According to CMHC’s rental affordability indicator, affordability in Ottawa’srental market improved this year. The indicator has been on an increasing trend since 2005 when it was at a low of 95. This year the median income of renter households grew by 6 per cent, while the median two-bedroom apartment rent jumped by just 4.4 per cent.  As a result, the rental affordability indicator in Ottawa stands at 98 for 2008, up from 97 in 2007.

2009 Rental Market Outlook

Moishe Alexander says A combination of strong rental demand with slow supply of purposed-built apartments will prevail next year, pushing vacancy rates down further to 1.0 per cent.  As well, record-high priced homes and economic uncertainty will deter some renters from jumping into the homeownership market.

Ottawa’s two bedroom apartment rents are expected to grow by 3 per cent in 2009. This increase will be below this year’s growth of 3.7 per cent because there will be lower turnover among tenants. The Residential Tenancies Act allows rent increases over the provincial guideline for apartments that become vacant.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64423/64423_2008_A01.pdf

Moishe Alexander’s Review

Highlights

Moishe Alexander says The vacancy rate in the Moncton CMA was lower in 2008 at 2.4 per cent compared to last fall’s results. The largest decline occurred in West Moncton, where the vacancy rate was down 3.5 percentage points to 2.4 per cent. The overall average rent in Greater Moncton was up 2.4 per cent in 2008. Within the region, Moncton City had the largest increase at 2.6 per cent. The highest average rent in Greater Moncton was in Dieppe City at $638. Meanwhile, the average rents in Moncton City and Riverview were slightly lower at $625 and $630, respectively.

Moncton 2008 Rental Market Survey

Greater Moncton Vacancy Rate Declines in 2008

Moishe Alexander says Results from Canada Mortgage and Housing Corporation’s recently completed Rental Market Survey* revealed a lower vacancy rate for the Moncton CMA in the fall of 2008.  In October of this year, there were 234 vacant units in Greater Moncton, down from the 419 vacant units recorded during last year’s survey. As a result, the vacancy rate in Greater Moncton fell from 4.3 per cent last year to 2.4 per cent in the fall of 2008.  The expansion of the local rental universe during the past twelve months has not kept up with demand, resulting in fewer vacant units and a lower vacancy rate.

In 2008, the vacancy rate for twobedroom units, which account for approximately 67 per cent of the local inventory, mirrored the performance of the overall vacancy rate, dropping to 2.6 per cent from last year’s rate of 4.3 per cent. For one-bedroom units, the decline in the vacancy rate was even more substantial, down to 1.5 per cent compared to 4.4 per cent last year.

Within the tri-community area, Dieppe City had the lowest vacancy rate at 1.8 per cent, followed by Moncton City and Riverview at 2.4 and 3.4 per cent, respectively. In the outlying areas of the Moncton CMA, the vacancy rate was a low 0.9 per cent.

Stable Demand and Reduced Construction Push Down Local Vacancy Rate Throughout Greater Moncton

Moishe Alexander says The Greater Moncton area has benefited from positive economic growth during the past decade. During this period, annual employment growth in the area has been between two and three per cent annually. To the end of the third quarter, total employment in 2008 was on a record setting pace. With solid economic fundamentals and rising employment, population growth in Greater Moncton was the most significant among New Brunswick’s urban centres, bolstering housing demand. Despite favorable market conditions for home ownership, demand for rental units in the Moncton CMA persists, as evidenced by the lower vacancy rate in 2008. This year also marked the second consecutive decline in Greater Moncton’s vacancy rate after several years of steady increases dating back to 2001, when the vacancy rate was 1.6 per cent.  The most significant vacancy rate fluctuation in the tri-community area occurred in Dieppe City where the vacancy rate dropped from 4.0 per cent last year to 1.8 per cent in 2008, the lowest in the area.

Substantial population growth in recent years has resulted in steady demand for rental units. However, construction activity has not grown in step with demand. Higher than average starts in 2006 pushed up the vacancy rate last year. Subsequently, apartment starts declined in 2007 to a more typical level for the City of Dieppe.  With no apparent decline in demand, and expansion of the local rental universe constrained by fewer apartment starts, the number of vacant units declined in 2008.

The vacancy rate in Moncton City was identical to the overall rate for the CMA at 2.4 per cent. This was not unexpected, as the rental universe in Moncton City accounts for approximately eighty per cent of the

CMA’s overall inventory. Although population growth in Moncton City lagged behind its neighbor, Dieppe, it has nonetheless remained positive as the region’s dynamic economy continues to fuel economic development and attract people to the area. However, as was the case in Dieppe, new rental unit construction has declined in recent years. In fact, last year, apartment starts in Moncton City were substantially lower than the average annual total recorded during the past ten years. Fewer vacant units combined with steady demand have thus pushed down the vacancy rate from 4.4 per cent last year to 2.4 per cent in 2008.

With fewer new rental projects started in Moncton City last year, the vacancy rates in each of the region’s four separate zones were down in 2008. Both the East and North Moncton zones posted moderately lower vacancy rates in 2008 compared to last year. However, in both Central and West Moncton, this year’s vacancy rate was down considerably from 2007 levels. In Central Moncton, the vacancy rate was halved, down to 2.9 per cent from last year’s vacancy rate of 5.8 per cent.  In West Moncton, a similar decline occurred with the local vacancy rate falling from 5.9 per cent last year to 2.4 per cent in 2008.

In both Moncton City and Dieppe City, the significant decline in the vacancy rate is mainly attributed to reduced apartment unit construction.  Consequently, supply has fallen behind demand and the number of new rental units added to the local inventory has not been sufficient to prevent a significant decline in the vacancy rate.

In both centres, developers have shifted some of their focus to semi- detached homes. In recent years, the popularity of semi-detached homes in the Greater Moncton area has resulted in tremendous growth, with the bulk of new units added in Moncton City and Dieppe City. With semi-detached homes, consumers can obtain a newly-built product with a mortgage payment comparable to the typical monthly rent for a newer twobedroom apartment. Semi-detached homes also offer – in many cases – the option to obtain a customized home and they allow the owner to build equity in their new home. As such, semi-detached units have lured an increasing number of individuals to homeownership. The resulting demand has caused some developers to shift their focus from apartments to semi-detached homes, contributing to a reduction in supply and a lower vacancy rate.

In comparison, the growth in semidetached homes in the town of Riverview has been muted. Prior to this year, rental unit construction in the Riverview area had been proceeding at a relatively conservative pace. However, the new Gunningsville Bridge linking Riverview to Moncton’s downtown core has greatly improved accessibility for local residents. As a result, Riverview has benefited from increased apartment starts in both 2007 and 2008. The resulting expansion of the local rental universe has struck a better balance between supply and demand, limiting the decline in the local vacancy rate.  Although Riverview posted a lower vacancy rate in 2008, the decline was modest compared with Moncton City and Dieppe City, falling from 4.2 per cent last year to 3.4 per cent.

Vacancy Rate Lower in Newer Units

Moishe Alexander says In the Greater Moncton area, as is the case in many urban centres across the nation, the trend in residential construction has been towards larger homes with more amenities and living space. A growing number of consumers choosing to rent are also leaning towards larger, more elaborate units. Based on this year’s rental market survey, the vacancy rate for units built after the year 2000 was a low 0.7 per cent. This was a sharp decline from last year’s vacancy rate of 2.8 per cent. The vacancy rate for units constructed between 1990 and 1999 was equally low at 1.7 per cent. For units built prior to 1989, the vacancy rate increased with the age of the structure and varied between 2.1 per cent and 5.0 per cent. The vacancy rate was also lower in the upper rent ranges, which also confirms the fact that many consumers are seeking newer units with added features. In general, the higher priced units in Greater Moncton tend to be those most recently added to the local rental universe since they generally provide more value added items to consumers. In 2008, the vacancy rate for units where rent exceeded $800 declined to 0.7 per cent from last year’s level of 1.4 per cent. Although these units represent a small part of the overall rental universe in the Moncton CMA, they tend to be absorbed quickly once available, as they generally offer additional amenities such as elevators, laundry hookups, additional storage space, and in some cases underground parking. These extra features have been particularly relevant for empty nesters and retirees who favor the maintenance free living of a rental unit, while wanting to maintain the large living space and amenities associated with a single family home.

Rent Increase Moderate in the Moncton CMA

Moishe Alexander says In 2008, the average rent in the Moncton CMA for all unit types was $626, up from last year’s average of $610. The average rent for two bedroom units, which account for approximately two thirds of the CMA’s total rental universe, went from $643 in 2007 to $656 in 2008. Also, as to be expected, the average rent was the highest in structures built after 2000, at $727 per month. With many renters seeking larger, quality built units with additional amenities, newer units are generally absorbed with minimal delay despite the premium on rent.

Within the CMA, Moncton City had the lowest average rent in 2008 at $625 while Dieppe City had the highest at $638. The Town of Riverview was near the midway point between its two neighboring communities at $630. Riverview also posted the largest year-over-year increase in average rent, with a $22 per month increase from last year’s level of $608. Last year, Riverview had more apartment starts than either Moncton City or Dieppe City. As a result, a larger number of new units were added to the rental universe in Riverview. Owing to a competitive marketplace, newly added units typically offer additional amenities to lure potential renters, applying upward pressure on rents. This phenomenon has contributed to the larger increase in the average rent in Riverview.  The health of the local housing market has also had an impact on overall rents in the Moncton CMA. To the end of October, single-detached housing starts, though lower than last year, remained high in historical terms.  During the same period, the resale market, which is not expected to match last year’s record setting performance, has performed beyond expectations, with a minimal decline in sales compared to last year to the end of October. Favorable conditions, for both purchase and new construction, combined with relatively stable mortgage rates, have helped fuel activity in both the new and existing home market. Consequently, the wide range of housing choices available to area residents has limited the increase in average rent to a modest 2.4 per cent in 2008 (the 2.4 per cent average rent increase is based on a fixed sample methodology).

Availability Rate Declines in 2008

Moishe Alexander says Based on the results from the 2008 Rental Market Survey, the availability rate in the Moncton CMA declined in 2008, with a significant drop from 5.7 per cent last year to 3.1 per cent in 2008. Within the CMA, the availability rate was comparable in both Moncton City and Dieppe City at 3.1 and 2.8 per cent, respectively.  Meanwhile, the availability rate in Riverview was slightly higher at 3.9 per cent.

Since many renters prefer a larger space, the majority of new units added to the rental universe tend to be two bedroom units. With fewer new one-bedroom units added to the rental universe, the availability rate for these units was lower in 2008, declining to 1.8 per cent from last year’s total of 5.4 per cent. For two bedroom units, the availability rate was also lower, with a moderate decline to 3.5 per cent in 2008 compared to 5.7 per cent last year.

Rental Affordability Indicator

Moishe Alexander says CMHC recently introduced a rental affordability indicator for major centres. However, the indicator is not available for the Moncton CMA due to a lack of required data for that centre.

Rental Market Outlook

Vacancy Rate to Decrease Moderately in 2009

Moishe Alexander says Last year, the vacancy rate in the Moncton CMA declined following an upward trend that dated back to 2001. In 2008, the downward trend has been maintained with a further decline in the area’s overall vacancy rate. Although apartment starts in recent years have remained at historically high levels, they have nonetheless been significantly lower than the peak years of 2002 and 2003. Despite the steady construction activity, the vacancy rate dropped to 2.4 per cent in 2008 as demand, bolstered by positive in-migration, outpaced the increase in supply. Apartment starts are not expected to surpass last year’s total in 2008 and will likely post a modest decline this year and a further decline in 2009. Although employment in Greater Moncton has been at record high levels, inmigration is not expected to show significant growth next year. As a result, demand for rental units will likely remain stable over the course of the next 12 months. With fewer apartment starts and resilient demand for rental units, expect the overall vacancy rate to be between 2.0 and 2.5 per cent by the fall of 2009. Meanwhile, expect an average rent increase between 2.3 and 2.8 per cent.

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 Kingston’s vacancy rate for apartment buildings with at least three units dropped from 3.2 per cent in 2007 to 1.3 per in 2008. As a result the local rate is now at its lowest level since 2002, when the rate was 0.9 per cent. The matched sample average rent for two bedroom apartments in existing structures in Kingston was up 3.1 per cent from last year. Cost gap between owning and renting has widened and along with economic uncertainty is contributing to lower vacancies.

Kingston’s Vacancy Rate Posts Largest Decline Among Ontario Centres

Moishe Alexander says According to the biannual rental market survey conducted in October 2008 by Canada Mortgage and Housing Corporation (CMHC), the Kingston Census Metropolitan Area (CMA) average vacancy rate in privately initiated rental apartments with three or more units dropped from 3.2 per cent in 2007 to 1.3 per cent in 2008. As a result, the local rate is now the lowest vacancy rate since 2002 when the rate was 0.9 per cent.  Of the 15 CMAs surveyed in Ontario, Kingston had the third lowest vacancy rate behind Greater Sudbury (0.9 per cent) and Barrie (1.2 per cent). This tightening rental market in Kingston is primarily due to the fact that while demand has been increasing, the supply of rental units has remained relatively flat.  There was no new rental construction in Kingston this year.

A number of factors have increased rental demand putting downward pressure on vacancy rates. First, according to recent surveys conducted by CMHC on homebuying intentions, fewer renter households have been in the market planning a home purchase in recent years. This story was supported by lower ownership sales in Kingston throughout 2008. In essence, the weaker local economy in Kingston has slowed the movement of renters into homeownership market. In fact, healthy job growth in the lower paying service employment sector helped support demand for rental accommodation.  Generally, lower earning households possess a weaker financial capacity to successfully generate downpayment for a new home.  Another factor is increasing enrolment at both Queen’s University and St. Lawrence College, as students are traditionally a strong driver of rental demand. On the supply side, between January and October 2008, there were only 54 rental units absorbed into the Kingston rental market, down from the 155 units recorded during the same period last year.

Downtown Vacancy Rate Declines

Moishe Alexander says The areas of “old” Kingston (Zone 1) registered the second lowest vacancy rate in 2008, indicating that apartments remain harder to find in the core than in the suburbs. The average vacancy rate in the down-town area dropped from 4.3 per cent in 2007 to 1.2 per cent in 2008.  During the second half of 2008, fulltime employment among youth has been particularly strong. Generally, the youth population tends to occupy entry-level rental accommodation typically closer to shops and schools. Therefore, the decline in vacancies in downtown Kingston, particularly among older rental units (built between 1960 and 1974) and less expensive rental units, is evidence of vibrant youth-driven demand in this zone.

In Zone 2 (which encompasses Polson Park, Calvin Park and Portsmouth Village) the vacancy rate retreated again to 0.9 per cent, down 0.4 percentage points from the previous year. For two consecutive years, this zone has registered the lowest average vacancy rate across the entire Kingston CMA.

Meanwhile, in suburban Zone 3 (Kingscourt, Rideau Heights, Glenarden, and Strathcona Park) the vacancy rate declined 1.6 percentage points to 1.7 per cent from October 2007. A similar drop in average vacancy rate occurred in Zone 4 where the rate fell from 4.4 per cent in 2007 to 1.9 per cent in 2008.

High-End Rental Units Becoming More Popular

Moishe Alexander says An emerging trend in the Kingston CMA rental market is the declining vacancy rates at high-end rental units.

The lower priced units recorded the highest vacancy rates in the CMA.  With strong overall employment growth year-to-date, renters in October showed higher preference for affluent rental units. Furthermore, the proximity to public services tends to support the demand for these up-scale rental units.

Kingston’s Average Rents Trending Up

Moishe Alexander says Tighter Rental Market Conditions translated into average rent increases of between 1.9 and 3.5 per cent across all bedroom types and zones.  This was different from last year’s experience, when some areas recorded small declines. Hence, the average rent for a two-bedroom apartment in existing structures increased by 3.1 per cent, well above the 2.6 per cent increase in the overall cost of living index.

Interestingly, however, the October 2008 survey shows both the rent increases and vacancy rates in Kingston exhibited similar trend among all the zones. Although the area of Zone 4 remains home to the highest rents, there appears little difference between the downtown and outlying areas.

Rental Market Outlook

Moishe Alexander says As a result of increased concern among potential first time home buyers about the Canadian economic outlook, coupled with no new additions of purposed built rental stock , the apartment vacancy rate in Kingston is expected to remain relatively low at 1.5 per cent in October 2009. The average two-bedroom rent is projected to advance by 2.8 per cent. Although an overall slow job market is anticipated for 2009, job creation among the lower paying sectors will remain strong and contribute to additional tightness in the rental market.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64671/64671_2008_A01.pdf

Moishe Alexander’s Review

Highlights

Moishe Alexander says The average vacancy rate in the Kitchener CMA moved lower to 1.8 per cent. In the Guelph CMA, the average vacancy rate moved higher to 2.3 per cent. A number of factors which include a younger population, immigration, employment and less movement of renters to homeownership contributed to the change in rental demand. Rental housing demand will increase slightly in 2009. The vacancy rate will edge lower to 1.6 per cent in the Kitchener CMA and to two per cent in the Guelph CMA.

Minimal Changes in Rental Demand in Kitchener and Guelph

Vacancy Rate Lower in Kitchener/Higher in Guelph

Moishe Alexander says Demand for rental apartments in the Kitchener and Guelph CMAs moved in opposite directions. A small increase in demand contributed to a decline in the average vacancy rate for privately initiated rental apartments in the Kitchener CMA to 1.8 per cent from 2.7 per cent in 2007.  In the Guelph CMA, demand eased and the vacancy rate increased to 2.3 per cent from 1.9 per cent last year.  Although higher, the vacancy rate this year was still well below the levels seen in the five-year period between 2002 and 2006 when the vacancy rate averaged close to 3.3 per cent.
A number of factors, both demographic and economic, contributed to the changes in rental demand. In both Kitchener and Guelph, these factors include a younger population, strong immigration, youth employment, little employment growth and less movement of renters to homeownership.

Lower First-time Buyer Demand

Moishe Alexander says Many renter households took advantage of low mortgage rates throughout this decade and the longer amortization periods after 2006 and as a result, pent-up demand is largely satisfied and fewer renter households are planning to buy a home. House prices continue to rise and are discouraging some renter households from moving into homeownership. Some renter households may delay their home purchase as a consequence and remain in their rental accommodation for a longer period.

This lower first-time buyer demand is more pronounced in the Kitchener CMA as the difference between owning a home and renting an apartment is higher. In the Guelph CMA, steady job creation coupled with low borrowing costs enabled a lower but steady movement of first-time buyers into home ownership.

Population Characteristics Affect Demand

Moishe Alexander says A young population, a high level of immigration and declining household size contributed to the increased rental demand this year in the Kitchener CMA. These factors also kept demand in the Guelph CMA at a relatively strong level.

According to the 2006 Census, the Kitchener and Guelph CMAs have young populations compared to the Ontario average. Younger households are more likely to rent than older age groups. A large student population and a strong high-tech sector have contributed to the high youth presence and strong demand for rental housing. As well, many young people who gain full-time employment will move out of their parental home into rental accommodation. In the Kitchener CMA, while overall employment for those aged 15-24 has fallen, more than 1,200 full-time jobs in this age group have been created in the CMA in the last year encouraging youth household formation. In the Guelph CMA, while overall employment for those aged 15-24 has declined marginally, full-time jobs in this age group have fallen, limiting the formation of youth rental households.

In the 12 months ending June 30, 2007, more than 3,000 immigrants made their new home in the Kitchener CMA. Due to a high employment rate and relatively more affordable home prices and rents compared to the GTA, immigrants find the Kitchener CMA an attractive place to live. A large proportion of persons new to Canada will initially rent as it takes time to gain employment, establish a credit rating and save for a down payment.

Moishe Alexander says Smaller household size added to the demand for rental housing. According to the 2006 Census, one-person, lone-parent and couples without children households increased at a higher rate than couples with children households. A higher percentage of these smaller-sized households rent. The oldest baby-boomers are now in their sixties and many are looking to downsize. Renting is a viable option.

Resilient Local Economies

Moishe Alexander says The local area economies have remained resilient despite uncertainty in global financial markets and a weak US economy.

Although job growth has slowed in the Kitchener CMA, employment has remained at a high level. Job uncertainty and less confidence in the economy have delayed some renter households’ decision to purchase a home. However, for the first three quarters of 2008, employment in the Kitchener CMA grew by 2.4 per cent compared to the same period in 2007. All of the job gains were in full-time employment. While the goods-producing sector continues to be a drag on the local economy, the services sector continues to add jobs.

In the Guelph CMA, employment has remained at a high level with job growth of more than six per cent in the first ten months of this year compared to the same period in 2007.  With strong job growth in the 25-44 and 45-64 age groups, some renter households in these age groups were able to purchase a home.

Condominium Apartment Completions

Moishe Alexander says Condominiums are a more affordable type of housing compared to single detached homes and are a viable alternative to renting for first-time buyers. More than 80 condominium apartments were completed in the Guelph CMA this year. First-time buyers and empty-nesters, who may otherwise have rented an apartment, are attracted to this type of ownership housing. In the Kitchener CMA, only 50 condominium apartments were completed in the same period.

Rent Growth Below Inflation

Moishe Alexander says The percentage change of average rent from fixed sample is 0.9 per cent for a two-bedroom apartment in the Kitchener CMA and 1.6 per cent in the Guelph CMA. This measure is strictly based on structures that were common to the survey sample for both the 2007 and 2008 surveys. For the Kitchener CMA, this increase was well below the Residential Tenancies Act (RTA) guideline for 2007 of 1.4 per cent.  As well, this increase was below the inflation rate. In the Guelph CMA this increase was slightly above the RTA guideline for 2007, but below the inflation rate.

Rental Supply Declines In Kitchener

Moishe Alexander says At 174, the number of purpose-built rental apartments completed in the Kitchener CMA since June 2007 was somewhat lower than usual. Over the last five years, the number of new rental apartments completed has averaged about 650 annually.  Despite this additional supply, the private rental apartment universe decreased by 184 units because some apartments were converted to other uses. With more than 800 rental apartments under construction currently, completions next year will be more in line with the longerterm average.

No purpose-built rental apartments were completed in the Guelph CMA since June 2007. As a result, the private rental apartment universe remained unchanged this year.

Low Vacancy Rates for One and Two-Bedroom Apartments

Moishe Alexander says The vacancy rate for all bedroom types of rental apartments decreased in the Kitchener CMA The majority of private rental apartments are one and two-bedroom units. These two unit types accounted for 93 per cent of the total apartment rental universe and have the lowest vacancy rate at 1.8 per cent. The one-bedroom apartment vacancy rate edged lower to 1.8 per cent from 2.2 per cent a year ago, while the two-bedroom apartment vacancy rate declined more significantly from 2.9 per cent to 1.8 per continent

Moishe Alexander says A more than 100 unit decline in the supply of two-bedroom apartments combined with increased rental demand pushed the vacancy rate down to this level, the lowest since 2001. The widening gap between the average principal and interest payment for a resale home and the average two-bedroom rent has impacted some renters’ interest in moving into homeownership. With the more diverse financing options available after 2006, many first-time buyers were able to enter the resale market earlier than would normally have been expected, resulting in lower demand for homeownership from current renters.

Affordability Indicator

Moishe Alexander says According to CMHC’s rental affordablility indicator, affordablility in Kitchener’s rental market increased this year. The rental affordability indicator in Kitchener stands at 108 for 2008, up from 101 in 2007. The 2007 indicator was the lowest level of affordability Kitchener has seen in the thirteen years for which the indicator is available. The rental affordability indicator is not available for Guelph due to a lack of required data for that centre.
Rental Market Outlook: 2009

Moishe Alexander says Rental housing demand will increase slightly in 2009. The vacancy rate will edge lower to 1.6 per cent in the Kitchener CMA and to two per cent in the Guelph CMA. In the Kitchener CMA, demand for rental accommodation in 2009 will be boosted by immigration, rental household growth and little movement into homeownership. Migrants will continue to be attracted to the CMA due to its relatively stronger economy compared to other Ontario CMAs.

On balance, population will increase by 2,500 next year due to international migration. Immigrants represent more than 50 per cent of the net population increase due to migration. They tend to rent when they first move to Canada. Due to the expected lower job growth and uncertain economic conditions, more renter households will delay their plans to move into homeownership.  Although the gap between average rent and average mortgage carrying cost will narrow somewhat in 2009, the number of rental households will continue to grow. In the Kitchener CMA, with few new condominium apartments being built, younger, downsizing and aging households have little alternative but to rent.  On the supply side, with more than 800 rental apartments under construction in the Kitchener CMA, rental completions will be more in line with the historical average in 2009. This increased supply will partially offset the higher demand.  In the Guelph CMA, although 177 rental apartments are currently under construction, no new rental apartments will be completed by next October. With higher demand and no new supply, the rental market will tighten. On the other hand, with more new condominium apartment completions next year, some renter households will be able to move to ownership housing in this more affordable type of housing. As well, due to less than optimistic job prospects, some youth will remain in their parental home longer.

Moishe Alexander says With the vacancy rate in both CMAs expected to be below its 20-year average in 2009, there will be slightly more room to raise rents. In both CMAs, rent increases in 2009 will be in line with the Residential Tenancies Act guideline for occupied units of 1.8 per cent.

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64399/64399_2008_A01.pdf

Moishe Alexander’s Review

Sherbrooke CMA housing starts and MLS® sales to fall in 2009

A slightly less favourable labour market in 2009

Moishe Alexander says In 2007, the labour market in the Sherbrooke census metropolitan area (CMA) was characterized, among other things, by the creation of over 2,000 jobs (+3 per cent) and a significant decrease in the number of unemployed individuals.  Personal disposable income per capita had in fact increased by 5.3 per cent. However, things changed slightly in the first nine months of 2008: the area now shows a small loss of 375 jobs, or 0.5 per cent, compared to the same period last year. The drop in full-time jobs was solely responsible for this loss, as part-time jobs posted a small gain (+0.7 per cent). The Bank of Canada now expects Canada’s economic growth to moderate in 2008 and 2009. Consequently, the Sherbrooke labour market will be slightly less favourable this year and next, which will not be without implications for the Sherbrooke housing market.  Still, the economic outlook for 2009 does appear brighter. Public investments included in the Quebec government’s infrastructure plan should somewhat stimulate the regional economy. Numerous employers, such as the CHUSFleurimont, CGI and Charles River Laboratories, will also be seeking new talent during this period.

Mortgage rates

Moishe Alexander says Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

Net migration in the CMA expected to decline slightly in 2009

Moishe Alexander says In 2007, net migration in the CMA was about 1,150 people, the highest level in the last three years. However, the same scenario is unlikely to occur in 2008, since the preliminary data1 show a decrease in newcomers planning to settle down in the Estrie area this year. After the first two quarters, this level was down 7 per cent, compared to the same period in 2007. In addition, still attracted by the abundance of job opportunities, many more people will head out West, which will lower net migration in the CMA. This year, 1,100 migrants will therefore be looking for dwellings (mainly rental) in the CMA, which will dampen housing demand.

Net migration in the CMA should improve next year, however, as the Quebec government wants to substantially increase the number of immigrants by 2010. As interprovincial migration should still remain favourable to the Western provinces over the same period, only the increase in international migrants will help net migration rise in 2009 and get close to the 2007 level of 1,150 people.

Resale market to become more balanced

Moishe Alexander says The resale market in the Sherbrooke CMA stayed very active in 2007, with 1,918 transactions registered, for a 7-per-cent increase over the same period in 2006. The factors that likely accounted for this increase include healthy labour market conditions in 2007 and relatively low mortgage rates. The situation is very different this year: from January to September, MLS® sales are down by 5 per cent from the same period a year ago, with the decrease affecting mainly less affordable housing. This small decrease will not be erased by the end of 2008, such that MLS® sales will fall by 5 per cent for the year, to 1,820 transactions.

In 2009, the favourable financing conditions and improved labour market situation should help the resale market recover. As these economic changes will be occurring gradually and not all at once at the beginning of the year, MLS® sales will decrease by 2 per cent in 2009, to 1,780 transactions. Contrary to home sales, properties listed in the MLS® system from January to September were up 16 per cent compared to the same period in 2007 (1,160 in 2007, compared to 1,350 in 2008). These numbers have been rising steadily for the past five years. In fact, all housing types registered increases in listings, but especially condominiums (+40 per cent). The upward trend will also continue in 2008 and 2009, with active listings rising by 17 per cent this year to 1,365 units and by 8 per cent next year to 1,480 units.  Three factors effectively suggest that these increases will occur. First, with decreasing MLS® sales, homes will stay longer on the market. Second, a broader choice will prompt potential buyers to visit more houses before making a purchase, therefore lengthening the listing period. Third, new listings will also go up in the CMA and increase the housing supply. Given that sales and listings will follow opposite trends, the Sherbrooke CMA market will become balanced, with the seller-to buyer ratio2 reaching 8 to 1. This means that the power of sellers on the market will shift somewhat and that price increases will be less significant. The average price of properties sold through the MLS® system will therefore reach $186,750 this year (+1 per cent) and $188,600 in 2009 (+1 percent).

Moishe Alexander says In the first three quarters of 2008, the increase in the average price was in fact very small (half of a percentage point). This can be mainly explained by the decrease in the average selling price of homes in the upper price range ($250,000 or more) over the same period, which put downward pressure on the overall average price. This phenomenon occurred mainly in Magog and in the areas surrounding the city of Sherbrooke and therefore partly accounts for the small price increase noted to date.  The Magog resale market also stands out from the Sherbrooke CMA market in another respect. After three quarters, the number of properties sold (228) was 21 per cent below the same period in 2007 (288), and the MLS® average price was down by 3 per cent. There is every indication that Magog will end 2008 with decreases in both home sales and the average price3. In terms of sales, however, 2007 was a record year in Magog, relativizing this decline and minimizing its importance. In 2009, MLS® sales will remain stable in Magog, when compared to the 2008 level.

Housing starts to decrease in 2009

Moishe Alexander says In 2008, housing starts will increase by 16 per cent in the Sherbrooke CMA, from 1,318 units in 2007 to 1,530 this year. Both the singledetached and the multiple housing segments will contribute to this increase, but single-detached home construction will show better results. During the first three quarters of the year, foundations were laid for 580 single-detached houses, a historically high level. Strong employment growth in 2007 is one of the factors explaining this increased activity. However, the more moderate economic growth and job creation currently observed will have an impact on construction in this segment by the end of 2008 and on through next year. The new home market (as opposed to the resale market) usually reacts less rapidly to changes in economic conditions, as several steps must be completed before construction can begin, such as buying a lot and checking zoning bylaws. In 2008, 780 single-detached houses will be started, compared to 666 in 2007 (+17 per cent). In 2009, in addition to the moderating economic growth, increasing competition from the resale market, due to the rise in listings, will cause starts of this type to fall by 23 per cent to 600 units.
As for multiple-family (semidetached, row and apartment) housing construction in the CMA, starts were down 16 per cent after nine months of activity in 2008.  While semi-detached and row home building increased by 10 units (from 68 in 2007 to 78 in 2008), apartment starts fell by 20 per cent4 (from 459 units in 2007 to 367 in 2008).

This 16-per-cent decrease in multiple housing starts may appear irreversible at first glance, but construction in this segment will end 2008 on the rise (+15 per cent), with 750 units, versus 652 in 2007, as two large rental projects are currently under construction. In fact, a 150-unit retirement home will soon be added to Magog’s rental housing stock, and some 50 social housing units are being built in Sherbrooke.

As in the case of the single-detached home segment, multiple housing starts will also fall in 2009. The construction of semi-detached and row homes and condominium units will not be as hard hit by the decrease in activity, thanks to their relative affordability. Supply of these housing types is rising sharply on the resale market, however, which should still slow the pace of building for these types of dwellings.
Construction should therefore get under way on around 100 semidetached and row homes and 125 condominium units next year, or about the same volumes as in 2008. In addition, two factors explain why fewer rental housing units will get under way next year. First, the vacancy rate increase between 2008 and 2009 (see next section) will prompt builders to slow the pace of rental housing construction. Second, the rental housing starts volume for 2008 is being inflated by the construction of a large retirement home and some new social housing units, which means that the level of activity in 2009 will not be able to exceed the 2008 results. About 400 rental housing units will therefore be started next year, compared to 500 in 2008.

Overall, multiple housing starts in the Sherbrooke CMA will fall by 13 per cent in 2009 (from 750 units in 2008 to 650 in 2009). However, large rental housing projects could still get under way (Sommet de la Santé, Carré 100T) next year, which would change the current forecasts.

Rental market easing but will remain tight

Moishe Alexander says Following the hike in the vacancy rate posted last year, from 1.1 per cent in 2006 to 2 per cent in 2007, the rental market will ease slightly in the Sherbrooke CMA in 20085. The current demographic and economic context is pointing to a more moderate demand in this market, at the same time as 300 new apartments should be added to the rental housing stock. The very slight increase in demand will be mainly caused by the decrease in net migration in the area and by moderate job growth for young people in the area. In these conditions, the vacancy rate will reach 2.1 per cent in 2008, up by one tenth of a percentage point over 2007.

The results of the latest CMHC Rental Market Survey (conducted in April 2008) are in line with the above-mentioned forecast. In fact, the rate increased slightly, from 1.4 per cent in 2007 to 1.6 per cent in 20086, which bodes well for the results of our next survey, to be released in December 2008.
In 2009, as is the case this year, the rental market will continue to ease slightly, with the vacancy rate climbing to 2.2 per cent. While few traditional rental apartments7 will be added to the existing rental housing stock, demand in this market will only be bolstered by the anticipated moderate gains in net migration and youth employment.

Although market conditions will be easing, the average rent for twobedroom apartments will increase by 3 per cent in 2008 and 2009, reaching $545 and $560, respectively. It should be recalled that, even if the vacancy rate is on the rise, the proportion of vacant two-bedroom apartments remains relatively low, putting upward pressure on rents.

Retirement home vacancy rate should increase

Moishe Alexander says According to the latest Rental Market Survey results for the Sherbrooke CMA, the retirement home vacancy rate climbed by 3 percentage points between 2007 and 2008 (from 4.5 per cent in 2007 to 7.5 per cent in 2008).

Weaker demand for units in retirement homes, combined with a supply that remained relatively stable, accounted for this increase. Two major factors suggest that the retirement home vacancy rate will continue to increase in 2008 and 2009. First, the slower growth in the population aged 75 years or older8, the main clients in this market, should curb the increase in demand. Second, about 350 new retirement housing units will be added to the market by 2009, for an 11-per-cent increase in supply compared to the 2007 level. Other projects are also being planned and could double the number of units to almost 700 by 2010. Given the surge in supply and the slowdown in demand, the vacancy rate will rise over the next two years in the Sherbrooke CMA.

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

http://www.cmhc-schl.gc.ca/odpub/esub/64295/64295_2008_B02.pdf

Economic and demographic conditions

Moishe Alexander says in the Saguenay census metropolitan area (CMA), the labour market has been experiencing a slowdown for the past few quarters. In fact, following a loss of 175 jobs in 2007, the CMA saw 245 more jobs disappear from January to August 2008. This decrease in the number of employed persons resulted from a forestry crisis that forced several plants to shut down and also from the high job levels observed in the area in 2004 and 2006. These high employment levels were attributable to the labour demand from a few major industrial projects, including the construction of the Péribonka IV hydroelectric dam and the expansion of the Alouette plant in Sept-Îles. Since these projects have been completed and the next major industrial projects—construction of a new plant in Jonquière by Rio Tinto Alcan and the Eastmain-1-A–Rupert– Sarcelles hydroelectric power station by Hydro-Québec—are only at their preliminary phase, many workers are now unemployed. The projects will pick up the pace starting in the summer of 2009 and will reach their cruising speed in 2010. It is therefore expected that the number of jobs in Saguenay will decrease between 1.8 to 2.2 per cent in 2008. Despite this decrease, the employment level, at 69,000, will remain above the average of 68,000 for the last 10 years. In 2009, employment should pick up slightly.

Moishe Alexander says The Saguenay CMA economy has strengthened in recent years with the announcement of major investment projects, such as the widening of Highway 175 and the modernization of the Rio Tinto Alcan plant. In addition, the gradual increase in retirements seems to be having an impact on net migration, as there are more and more quality jobs for young people, who are no longer forced to leave the area. For the first time since the year 2000, the latest interregional migration statistics1 indicate a positive result for the 25 to 44 years’age group.  However, net interregional migration remains negative overall. At the interprovincial level, the CMA is also facing a deficit, although smaller.

Moishe Alexander says Lastly, only international migration has shown positive results since the beginning of the decade, but these levels are far from sufficient to offset the departures to other Quebec areas or other provinces. It is therefore expected that total net migration will go from -794 in 2007 to -600 in 2008 and then to -450 in 2009. Still on the demographic front, household formation remains positive, despite the decline in the population. The aging of the population, as well as divorces and separations, are the main reasons. In the Saguenay CMA, about 350 households will be formed annually over the next five years.

Mortgage Rates

Moishe Alexander says Mortgage rates are expected to be relatively stable throughout the last quarter of this year, remaining within 25-50 basis points of their current levels. Posted mortgage rates will decrease slightly in the first half of 2009 as the cost of credit to financial institutions eases. Rising bond yields, however, will nudge mortgage rates marginally higher in the latter half 2009. For the last quarter of 2008 and in 2009, the one year posted mortgage rate will be in the 6.00-6.75 per cent range, while three and five year posted mortgage rates are forecast to be in the 6.50-7.25 per cent range.

Residential construction to stay strong in 2008 and 2009

Moishe Alexander says For a fourth straight year, starts will be on the rise in the Saguenay CMA in 2008. In fact, after reaching 464, 485 and 685 units in the last three years, respectively, total starts in the area should attain 800 units in 2008.  This will be an increase of 17 per cent over 2007 and the highest result for the Saguenay CMA since 1991, when 955 starts had been enumerated. In 2007, both the freehold home segment2 (+35 per cent) and the rental housing segment (+58 per cent) had fuelled the growth. Since the first segment was very active last year, a small gain is expected in 2008. The construction of a building with more than 200 apartments in Chicoutimi will cause the second segment to post a greater increase and will account for 29 per cent of all starts in 2008.

Moishe Alexander says Given that financing conditions remain attractive, that the number of existing homes for sale is limited and that employment is at a historically high level, a slight decrease in expected in 2009. Construction should therefore get under way on 720 units, or 10 per cent fewer than in 2008.

Level of freehold home building will be high

Moishe Alexander says As mentioned earlier, freehold home building has been increasing significantly for the past few years. From an annual average of 265 units from 2000 to 2005, starts rose to 315 and 318 units in 2005 and 2006, respectively, and then to 430 units 2007. The last time that such a high volume was recorded in the Saguenay CMA was in 1997, after the flooding. At that time, many homes had been destroyed or damaged, resulting in a need to rebuild. The environment in which the market has evolved in recent years is therefore quite different and is instead based on solid economic fundamentals.

Moishe Alexander says In 2008 and 2009, the impact of these economic factors will remain positive. Despite the job losses registered since the beginning of the year, the labour market continues to benefit from several major industrial and infrastructure investment projects. As these projects are not dependent on the global economy, they will support the labour market over the next few years. Net migration will keep improving, which will lead to an increase the number of potential buyers and, as a result, a greater demand on the overall housing market. Lastly, mortgage rates should fall slightly, which will extend the attractive financing conditions of recent years.

Moishe Alexander says The tightening of the rental market in the last few years is another factor that must be taken into account. This should stimulate the construction of duplexes in 2008 and 2009, since the rental of the second unit provides these homeowners with a certain income.  The limited supply on the resale market will also boost the construction of freehold homes, as some households will be prompted to opt for a new house after not being able to find a property that suits them on the existing home market. We therefore forecast that 450 freehold homes will be started in 2008, or 20 more than in 2007 (+5 per cent). These new dwellings will include 375 single-detached houses and 50 duplex units. Most will be built in the boroughs of Jonquière and Chicoutimi, and a few, in La Baie and Saint-Honoré. In 2009, even though a slight slowdown is anticipated, the freehold home starts volume will remain high, with 420 such new units expected, or 7 per cent fewer than in 2008.

Retirement home segment supporting rental housing construction

Moishe Alexander says The construction of rental housing, with the exception of retirement homes, continues to be very limited in the Saguenay CMA. Until 2005, this was understandable, since the vacancy rate was still above 4 per cent, so there was no significant need for new units. Since then, however, the vacancy rate has been steadily falling. According to the latest results (April 2008), this rate stood at 1.8 per cent, which would normally stimulate apartment construction. But this is not the case, and it is not expected to be case in 2008 or 2009. The fact is that current construction costs— including the land—are such that it is difficult for developers to offer rents that would be competitive with average market rates, making it hard to rent out the apartments. In addition, with the aging of the population, another segment is taking over, namely, retirement housing.

Moishe Alexander says Since 2002, 51 per cent of all rental housing units started in the area had been intended for seniors. In 2008, this share will rise to 70 per cent, with the construction of the fifth phase of an existing residence in Chicoutimi (an expansion with over 200 apartments). In 2009, construction could get under way on another retirement home, this one with just under 200 units. These projects arose in part from the fact that the vacancy rate for apartment retirement homes in Chicoutimi stood at 0 per cent in October 2007. In all, it is expected that 330 rental housing units (including those intended for seniors) will be started in 2008, or 43 per cent more than in 2007. In 2009, there should be a slight decrease in activity, as 280 starts of this type are anticipated (-15 per cent).

Little movement on the rental market

Moishe Alexander says The aging of the population, the constant improvement in net migration and the good performance of the labour market in recent years have led to a greater demand for rental dwellings and, as a result, a tighter a rental market. This caused the vacancy rate to fall from 5.6 per cent in 2004 to 2.8 per cent in 2007. In addition to these factors, there should slightly more CEGEP students in the area in 2008. Supply, despite only a very small rise, should meet these new needs and, for this reason, we do not expect the market to ease significantly in 2008.  In fact, the vacancy should reach 3 per cent this year, compared to 2.7 per cent in 2007. For 2009, we are anticipating a slightly greater increase in supply as a result of the tighter market, while demand should, at the very least, be maintained. Consequently, the vacancy rate will reach 2.9 per cent in 2009.

Condominiums gaining a foothold in the area

Moishe Alexander says Condominiums seem to be taking root in the Saguenay CMA housing market. While their numbers are rather limited (some 20 new units annually since 2006), this is a tenure option that meets the needs of specific client groups. While their relatively low prices attract first-time home buyers, their low maintenance appeals to retiring households. They are very well suited to older households wishing to remain homeowners but for whom maintaining a property is becoming a burden. Given that the aging of the population will only intensify, activity in this market segment should at least be maintained in the short term. For the moment, the fact that new and existing homes are not as expensive here as in other large urban centres across Quebec, where condominiums are well implanted, is probably the main reason for the limited number of condominium starts in Saguenay. In 2008 and 2009, foundations should be laid for about 20 units of this type.

Fast growth in prices to affect existing property sales

Moishe Alexander says Sales of single-family homes3 reached a peak in 2007 in the Saguenay CMA.  In fact, 1,303 homes were sold through the Service inter-agences / Multiple Listing Service (S.I.A. / MLS)® during the past year, or 51 more than the previous record set in 2005 (1,252 transactions). In 2008, a slowdown is expected, even though the economic and demographic conditions will remain favourable. The reason is that singlefamily home prices have risen significantly in recent years, and this is starting to cause some hesitation among potential buyers. The average price effectively went from $94,346 in 2003 up to $136,913 in 2007, for an increase of 45 per cent in four years. For several years now, sellers have had the edge in determining prices, on account of the limited supply and a strong demand. Consequently, we are seeing price hikes well above inflation. Since the situation will not be any different in 2008, 1,230 sales are anticipated, and the average price should reach $150,000 (+10 per cent).

Moishe Alexander says In 2009, the sales volume will be essentially the same as in 2008, as the factors supporting demand will remain solid. However, inventories are expected to rise slightly in the price ranges that are in competition with the new home market. This should cause the market to ease, somewhat lessening the pressure on the average selling price in this range.  We therefore expect that singlefamily homes will sell for an average of $160,000 in 2009 (+7 per cent).

You can find the entire report in PDF format through the following link:
http://www.cmhc-schl.gc.ca/odpub/esub/64283/64283_2008_B02.pdf