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Stable national real estate market forecast to endure

- Housing market sees bounce back from 'awful winter' - Royal LePage
    revises forecast to the positive -

    TORONTO, July 7 /CNW/ - Canada's resale housing market recovered lost
ground in the second quarter and is poised to stabilize for the remainder of
2009, after a very slow start to the year, according to the Royal LePage
Market Survey Forecast and House Price Survey released today. As the economy
begins to stabilize and consumer confidence improves, house prices are
expected to appreciate slightly in much of eastern and central Canada. Greater
than national average price declines are predicted for the western cities that
saw the greatest price inflation earlier in the decade, including Edmonton,
Calgary and Vancouver.
    "Given the grim shape that Canada's real estate market was in this past
winter, the turnaround we have witnessed in the second quarter is really quite
remarkable. We believe this improvement represents a sustainable change across
the country. While seasonally weaker conditions are to be expected in the
fall, the plucky Canadian real estate market is stabilizing and a healthy
level of activity is forecast for the second half of 2009," said Phil Soper,
president and chief executive officer, Royal LePage Real Estate Services.
    During the second quarter, average house prices across most Canadian
markets began to appreciate, recovering from the lows experienced during the
winter months. Average national prices remain slightly behind those posted
during the same period in 2008. Of the housing types surveyed, the price of
detached bungalows declined to $327,964 (-3.5 per cent), two storey property
prices decreased to $392,378 (-3.7 per cent), and standard condominiums price
points fell slightly to $236,612 (-4.0 per cent), year-over-year.
    Soper observed, "With our industry's busiest quarter behind us, we feel
comfortable revising our 2009 forecast to the positive. When the anticipated
market decline struck last winter, it was with greater speed and intensity
than predicted, but the strength of the rebound was equally surprising. If
general economic conditions continue to improve, as we expect they will, 2009
will be characterized as a period of moderate housing market correction after
several years of above-average price growth."
    The 2009 national average house price is forecast to decline marginally
by 2.0 percent, to $297,500 by end of year and unit sales are projected to
fall slightly by 1.0 percent to 430,000.
    "Improved affordability, driven by flat or lower home prices and
inexpensive mortgage financing, has been the principle catalyst in this
recovery. Pent up demand is also a factor in the lift we see in the second
quarter numbers. For six months straddling the year's beginning, buyers stayed
away from the market in an understandable, emotional reaction to very
unsettled global economic conditions. Canadians appear to be stepping beyond
these fears and are once again moving onto and up the home ownership ladder,"
stated Soper.
    In early 2009, the precipitous drop in unit sales remains the most
dramatic indicator of the recession's impact on Canada's real estate market.
With spring, consumers appeared ready to believe the worst was behind them and
returned to the market in force, driving increased activity across each
housing type. Couple this with historically low interest rates and leveling
unemployment, Canada's residential real estate market got back on track during
the quarter.
    Undergoing an inevitable cyclical correction, price adjustments can be
seen with marked variances across Canada's provinces. As expected, British
Columbia and Alberta posted the most significant price modifications, as home
values in those markets retreated in the wake of several mid-decade years of
unsustainable price inflation, and have now evolved to a more balanced state.
Prices appear to have stabilized and it is expected that these regions will
continue to see improvements into 2010. In particular, the impact of lower
home prices has improved affordability to the point that people are buying
homes again on the West Coast, where sales activity has increased
substantially.
    Alternatively in Atlantic Canada, homes continue to appreciate due to
strong local economies, which have helped to shelter the region somewhat from
the turbulence witnessed in other provinces. As well, the region's generally
moderate home prices have helped keep demand strong. Newfoundland, in
particular, stands out as a region that continues to see significant home
price appreciation, as supply cannot keep up with the demand driven by vibrant
and growing industries such as those in the province's oil and gas sector.
    Meanwhile, home prices in Toronto declined slightly in the second
quarter, reflecting the national average trend. In the early spring, it was
first-time buyers who triggered the increased activity levels, now those
looking to move up are also active in the market. Similar to the situation in
other large cities in central Canada, the most desirable neighbourhoods
experienced supply shortages, which put upward pressure on prices.
    "Looking ahead to the second half of 2009, year-over-year price
comparisons will likely appear increasingly more favourable. It is important
to remember that the baseline for the latter half of 2008 was unusually low,
particularly in the fourth quarter when the full impact of the global
financial crisis was felt. Our expectation is that most Canadian regions will
experience stable housing prices through into the spring of 2010," concluded
Soper.

    REGIONAL MARKET SUMMARIES

    Halifax

    In Halifax, a stable economy has contributed to a healthy real estate
market where average house prices increased modestly despite a slight dip in
sales activity. The market is beginning to pick up following a slow first
quarter. Pent up demand will see a return to a more active market in the last
half of the 2009 with the anticipation of a slight boost in sales activity and
average house prices growing at a leisurely pace.

    Montreal

    The housing market in Montreal experienced a solid second quarter, with
average house prices for most property types expected to increase for the
remainder of 2009. Higher inventory levels resulted in balanced market
conditions seeing the number of new listings equal to the number of sales. Low
interest and unemployment rates will help maintain the strength of the real
estate market through to the end of the year.

    Ottawa

    Ottawa continues to remain a steady market for residential real estate,
with sales activity in the second quarter coming out strong from a slow first
quarter. Ranked number two among Canada's large cities for affordable real
estate and coupled with low interest rates, all types of buyers were drawn to
the market. House prices are expected to remain stable throughout the
remainder of year with numbers slightly higher than anticipated.

    Toronto

    In Toronto, the real estate market witnessed significant second quarter
gains. The return of consumer confidence and an upswing in spring market
activity brought house prices and unit sales down as buyers emerged to take
advantage of affordable properties and low lending rates.
    As the market begins its transition from a buyer's market to a balanced
market, with indications of a seller's market arising, it's anticipated that
the market will stabilize by the end of year.

    Winnipeg

    Winnipeg's real estate market has remained relatively resilient in the
second quarter with average house prices in key housing segments increasing
from the first quarter of 2009. Real estate in Winnipeg is modestly priced
when compared to other cities in Canada, creating ideal conditions for buyers
in the province. Looking ahead, average house prices are anticipated to
stabilize for the remainder of the year.

    Regina

    Regina's real estate market started on the road to recovery in the second
quarter of 2009 and is expected to further improve through the remainder of
the year. An increase in unit sales helped diminish the city's high inventory
levels as buyers are beginning to initiate deals. Recovering manufacturing and
resource sectors, new construction activity in Regina, and low interest rates
have also helped to improve buyer confidence.

    Calgary

    With the economic downturn and the oil and gas industry struggling, the
housing market in Calgary has been on the decline since 2008, after many years
of price inflation at the beginning of the decade. Quarter one of 2009
revealed some signs of price increases and stabilization in certain areas in
Calgary, but the second quarter reveals fluctuations in the market. These
price fluctuations are occurring across Calgary in all housing types with the
market forecast predicting price reductions for the remainder of 2009.

    Edmonton

    Housing market conditions in Edmonton were characterized by lower
inventory levels and moderate house price increases. Buyer demand was strong
during the second quarter as most buyers felt a sense of urgency to capitalize
on the recent market conditions. This has led to a slight tightening in
Edmonton's housing market with appreciation in average house prices expected
for the last half of 2009.

    Vancouver

    Vancouver's real estate market stabilized in the second quarter of 2009
following a price correction that started last fall moving towards a balance
between supply and demand. Properties priced at, or below, market value are
generating multiple offers from buyers. Average house prices throughout the
last half of the year are expected to inch upwards, but increases will likely
be in the low single digits.

    Royal LePage's quarterly House Price Survey shows the following annual
change of prices for key housing segments in select national markets:

    -------------------------------------------------------------------------
                             Detached Bungalows
    -------------------------------------------------------------------------
                          Q2 2009     Last Quarter      Q2 2008    Bungalow %
      Market              Average        Average        Average      Change
    -------------------------------------------------------------------------
    Halifax               235,333        215,667        233,000          1.0%
    -------------------------------------------------------------------------
    Charlottetown         160,000        157,000        156,000          2.6%
    -------------------------------------------------------------------------
    Moncton               158,000        156,000        164,000         -3.7%
    -------------------------------------------------------------------------
    Fredericton           172,000        167,000        162,000          6.2%
    -------------------------------------------------------------------------
    Saint John            187,681        201,476        202,364         -7.3%
    -------------------------------------------------------------------------
    St. John's            200,000        193,000        181,000         10.5%
    -------------------------------------------------------------------------
    Atlantic              198,368        190,748        192,636          3.0%
    -------------------------------------------------------------------------
    Montreal              236,148        232,375        234,352          0.8%
    -------------------------------------------------------------------------
    Ottawa                325,417        317,500        316,167          2.9%
    -------------------------------------------------------------------------
    Toronto               416,179        405,286        434,282         -4.2%
    -------------------------------------------------------------------------
    Winnipeg              237,750        231,663        233,800          1.7%
    -------------------------------------------------------------------------
    Regina                272,900        266,625        278,850         -2.1%
    -------------------------------------------------------------------------
    Saskatoon             312,250        312,500        340,375         -8.3%
    -------------------------------------------------------------------------
    Calgary               401,600        391,833        438,122         -8.3%
    -------------------------------------------------------------------------
    Edmonton              302,143        297,857        320,000         -5.6%
    -------------------------------------------------------------------------
    Vancouver             760,000        743,750        839,500         -9.5%
    -------------------------------------------------------------------------
    Victoria              466,000        453,000        450,000          3.6%
    -------------------------------------------------------------------------
    National              327,964        319,865        339,879         -3.5%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                             Standard Two Storey
    -------------------------------------------------------------------------
                          Q2 2009     Last Quarter      Q2 2008    2 Storey %
      Market              Average        Average        Average      Change
    -------------------------------------------------------------------------
    Halifax               277,333        262,333        275,000          0.8%
    -------------------------------------------------------------------------
    Charlottetown         190,000        188,000        185,000          2.7%
    -------------------------------------------------------------------------
    Moncton               134,200        134,500        132,000          1.7%
    -------------------------------------------------------------------------
    Fredericton           210,000        210,000        197,000          6.6%
    -------------------------------------------------------------------------
    Saint John            240,889        268,000        285,179        -15.5%
    -------------------------------------------------------------------------
    St. John's            276,000        267,000        249,333         10.7%
    -------------------------------------------------------------------------
    Atlantic              198,368        190,748        192,636          3.0%
    -------------------------------------------------------------------------
    Montreal              337,872        330,056        336,443          0.4%
    -------------------------------------------------------------------------
    Ottawa                325,417        318,500        315,750          3.1%
    -------------------------------------------------------------------------
    Toronto               544,785        516,052        562,478         -3.1%
    -------------------------------------------------------------------------
    Winnipeg              262,914        251,721        257,800          2.0%
    -------------------------------------------------------------------------
    Regina                245,000        245,000        254,000         -3.5%
    -------------------------------------------------------------------------
    Saskatoon             337,250        348,500        388,000        -13.1%
    -------------------------------------------------------------------------
    Calgary               400,167        390,689        437,744         -8.6%
    -------------------------------------------------------------------------
    Edmonton              328,571        322,979        348,571         -5.7%
    -------------------------------------------------------------------------
    Vancouver             846,000        828,750        943,000        -10.3%
    -------------------------------------------------------------------------
    Victoria              446,000        435,000        470,000         -5.1%
    -------------------------------------------------------------------------
    National              392,378        379,708        407,374         -3.7%
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
                            Standard Condominium
    -------------------------------------------------------------------------
                          Q2 2009     Last Quarter      Q2 2008       Condo %
      Market              Average        Average        Average       Change
    -------------------------------------------------------------------------
    Halifax               164,000        162,000        154,500          6.1%
    -------------------------------------------------------------------------
    Charlottetown         120,000        120,000        120,000          0.0%
    -------------------------------------------------------------------------
    Moncton                   n/a            n/a            n/a          n/a
    -------------------------------------------------------------------------
    Fredericton           140,000        137,000        126,000         11.1%
    -------------------------------------------------------------------------
    Saint John            126,000        181,387        119,191          5.7%
    -------------------------------------------------------------------------
    St. John's            215,333        205,667        193,333         11.4%
    -------------------------------------------------------------------------
    Atlantic              174,623        172,423        156,774         11.4%
    -------------------------------------------------------------------------
    Montreal              209,311        206,528        204,942          2.1%
    -------------------------------------------------------------------------
    Ottawa                212,750        207,833        203,667          4.5%
    -------------------------------------------------------------------------
    Toronto               296,039        289,397        311,026         -4.8%
    -------------------------------------------------------------------------
    Winnipeg              143,700        145,943        144,614         -0.6%
    -------------------------------------------------------------------------
    Regina                180,375        168,806        190,000         -5.1%
    -------------------------------------------------------------------------
    Saskatoon             202,500        187,000        236,000        -14.2%
    -------------------------------------------------------------------------
    Calgary               252,344        245,756        285,033        -11.5%
    -------------------------------------------------------------------------
    Edmonton              203,833        199,167        226,000         -9.8%
    -------------------------------------------------------------------------
    Vancouver             424,000        406,500        450,750         -5.9%
    -------------------------------------------------------------------------
    Victoria              275,000        260,000        295,000         -6.8%
    -------------------------------------------------------------------------
    National              236,612        231,526        246,490         -4.0%
    -------------------------------------------------------------------------

    The Royal LePage Survey of Canadian House Prices is the largest, most
comprehensive study of its kind in Canada, with information on seven types of
housing in over 250 neighbourhoods from coast to coast. This release
references an abbreviated version of the survey, which highlights house price
trends for the three most common types of housing in Canada in 80 communities
across the country. A complete database of past and present surveys is
available on the Royal LePage Web site at www.royallepage.ca. Current figures
will be updated following the complete tabulation of the data for the second
quarter. A printable version of the second quarter 2009 survey will be
available online on August 7, 2009.
    Housing values in the Royal LePage Survey are Royal LePage opinions of
fair market value in each location, based on local data and market knowledge
provided by Royal LePage residential real estate experts. Historical data is
available for some areas back to the early 1970s.

http://newswire.ca/fr/releases/archive/July2009/07/c4373.html

reviewed by Moishe Alexander, CFC CEO

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Is it Overpriced?

THE CASE

This case involves violation of several rules under the RECO Code of Ethics regarding ethical behaviour, misrepresentation, competence, and unprofessional conduct.

In September 2006, RECO received a complaint from a company that held a mortgage for a property located at 1-A Street.  The printout of the MLS listing which was provided to obtain the mortgage in November of 2005 showed that 1-A Street was listed at $229,000.  When 1-A Street went into foreclosure it was determined that 1-A Street was worth less than $65,000.

A review of the listing showed that 1-A Street was listed by Brokerage A with Salesperson A in November 2005 at $229,000 and the listing was set to expire on July 17, 2006.

In November 2005, 1-A Street sold for $220,000.  The Agreement of Purchase & Sale indicated that there were no real estate brokerages involved in the transaction as the acknowledgement and commission trust sections of the Agreement of Purchase & Sale were not signed.  Further, the deposit was to be held by “The Vendor.”

On inquiry into the transaction, RECO Staff met with Broker A, the Broker of Record of Brokerage A, and confirmed that 1-A Street was not sold through Brokerage A.  Further, the appointment log on file showed that 1-A Street had never been shown during the time it was listed with Brokerage A.

Salesperson A wrote to RECO Staff and stated that the Seller was introduced to him by a client in October 2005, and that a few days later, the Seller asked him to view the Seller’s property.  When Salesperson A looked at the property, he advised the Seller that the property was worth about $100,000.  A week later, the Seller contacted him and offered the listing to him but the Seller insisted that the property be listed at $229,000.

Salesperson A stated that because he did not have many listings at the time, he was excited to get one and therefore listed the property at the price suggested by the Seller.  Salesperson A also confirmed that the listing expired without any showings.

THE FINDINGS

The RECO panel determined that Salesperson A acted in an unprofessional manner when he:

a) listed 1-A Street at a price that he knew was overly inflated, and;

b) did not do what a reasonably prudent registrant would have done to avoid allowing his services, including authorizing MLS listings that included grossly inflated property value, to be used for improper purposes.

Salesperson A thereby breached the following Rules of the RECO Code of Ethics:

RULE 1(2) ETHICAL BEHAVIOUR – A Member shall endeavour to protect the public from fraud, misrepresentation or unethical practice in connection with real estate transactions.

RULE 10 – MISREPRESENTATION – A Member shall not make any statement or participate in the creation of any document or statement that the Member knows or ought to know is false or misleading.

RULE 42 – COMPETENCE – A Member shall render conscientious service with the knowledge, skill, judgement and competence, in conformity with this Code of Ethics and the standards which are reasonably expected of Members.  When the Member is unable to render such a service, either alone or with the aid of other Members, the Member shall decline to act.

RULE 46 – UNPROFESSIONAL CONDUCT – A Member shall not engage in an act or omission relevant to the practice of the profession that, having regard to all the circumstances, would reasonably be regarded by Members or the public as disgraceful, dishonorable, or unprofessional.

PENALTIES AND COSTS

Salesperson A was ordered to pay a penalty of $7,000 within 120 days of the decision of the Discipline Committee.

__________________________

My thoughts?

This is a case of blatant over-pricing; a house valued at $100,000 that eventually sold for $65,000 was listed at $229,000 and never received a single showing, and the actions of Salesperson A breached four rules of the RECO Code of Ethics.

So what then do we make about under-pricing?

How is listing a $650,000 house at $559,000 (in hopes of getting $700,000) any different from over-pricing in the above examples?

I’m playing devil’s advocate here, because I do work for sellers as often as I work for buyers, and many sellers have it in their heads that the in-thing to do is under-price and hope for a bidding war.

I have to do what my seller wants, right?

Well, in the above example, Salesperson A took the listing for a $100,000 house at $229,000 because the seller told him to!  Yet it was the salesperson that was held accountable.

So how is under-pricing different?

I just don’t know anymore.

Frustration aside, I still don’t like the practice of under-pricing.  It’s just so sleazy and fraudulent, in my humble opinion.

Holding back on offers is one thing, but deliberately under-pricing is another altogether.

Maybe I’m just becoming too honest?

http://torontorealtyblog.com/2009/06/12/overpriced/

Info brought by Moishe Alexander, CFC CEO

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

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

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