Comments Off

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

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

Moishe Alexander’s Review

Highlights

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

Demand

Drop in Peterborough Vacancy Rate

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

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

Few Renters Moving to Homeownership

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

Weaker Employment Offsets Demographic Support for Rental Demand

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

More Rental Demand for Large and Small Size Units

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

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

Vacancy Rates in Older Buildings Decline

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

Apartments With Lower Rents in High Demand

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

Slight Decline in Availability

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

Softer Demand for Townhouses

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

Rent Increase Steady

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

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

Rental Market Outlook

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

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

Comments Off

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

Comments Off

Moishe Alexander’s review of the Moncton 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 Moncton Rental Market

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