Rising Rental Pressure in Edmonton and Calgary Means Higher Prices and Fewer Vacancies | Globalnews.ca

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If you’re looking for a place to live in Alberta’s major cities, it’s getting harder and harder.

Taylor Pardy, senior market analyst at Canada Mortgage and Housing Corporation, said Alberta’s major urban centers are expected to see gradual increases in rental rates and decreases in vacancy rates over the next two years.

“For Edmonton in particular, we are anticipating stronger rental demand,” he told Global News on Wednesday. “Part of the reason behind this is rising mortgage rates…it may result in some people delaying their purchase decisions and perhaps staying longer in a rental.

“Other forces in the rental market, such as higher population growth in Alberta with variables like interprovincial migration being more strongly positive since mid-2021, that generally support population growth, especially in the larger metropolitan centers, and it is historically co-related to downward movements in vacancy rates and gradual increases in rental rates”.

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The Statistics Canada Consumer Price Index (CPI) for July 2022 shows that the cost of buying a home or renting one has increased. As the costs of higher-interest-rate mortgages rise, the report notes that rental prices are accelerating, rising faster in July than in the previous month.

The report, released Tuesday, found that the mortgage interest cost index increased (1.7 percent) for the first time since September 2020 year over year and that rent increased 4.9 percent in July compared with the same month in 2021. That rent increase came after a 4.3 percent increase in June.

Ontario and Alberta had the fastest rent increases, the CPI found.

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Rishab Mehra is an international student from India who will start classes at the University of Alberta in September. She has been trying to find a place to rent off campus with roommates, but she says she has been very competitive and frustrating.

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“Some of them are accepted very quickly if they are close to the university,” he said. “We all went to a place, we liked it a lot. I thought, ‘I just need to take a quick video of the place and I’ll be back.’ When I got back there were other people there and they had already taken over the place.

“For me personally it has been very hard… I just hope to find a place as soon as possible.”

He said he has to factor water and power, as well as furniture, into his budget considerations.

“For an average two-bedroom apartment, it would be $1,700 to $1,800.

“I found a good place. It was $1,500 and I was like, ‘I’m going for it,’ but the utilities weren’t included… And on top of that, none of the apartments are furnished.

“I don’t know how I’m going to manage to bring all the furniture to that place and furnish the whole place.”

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“It’s a tug-of-war between the rental market and the sales market in every market we track,” said Jackson Cornelius, director of Zonda Urban, formerly Urban Analytics.

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“It is largely based on affordability. I think we’re looking at kind of a perfect storm here with the general housing supply issues that are taking place in the… metro Vancouver and metro Toronto and forcing people to re-examine where they choose to live in function of affordability.

“That has led to a substantial increase in interprovincial migration to Calgary and Edmonton, and across Alberta, in search of more affordable housing.

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A tighter housing market means fewer people will be able to own homes and instead rent, Cornelius explained, pointing to the Statistics Canada report.

“As home values ​​rise, some of the higher price-sensitive consumers will naturally be pushed out. When that happens, combined with consecutive increases in interest rates, that’s going to keep…people staying in the rental market.

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“Or sometimes it will cause, if interest rates go up, people will sell their homes because they can no longer make their mortgage payments and move into rental units.”

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Zonda Urban Q2 2022 Rental Take described Calgary’s recent rental demand as “record”. Overall, median vacancy is down 5.6% (a 4.5% year-over-year decrease) and median rental rates are up 13% (to $2.57 per square foot).

“We have definitely seen an increase in activity in the rental market,” said Kendall Brown, rental data market manager for Alberta and Ontario with Zonda Urban.

“Specifically in Calgary, we’ve seen an average increase in monthly rental rates of about $200 a month. In Edmonton, we are also seeing an increase in rental rates, not as significantly as in Calgary.”

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In Edmonton, Zonda Urban found that overall vacancy is down 2.9% from this time last year to 7.9% and median rental rates are up four percent from the first quarter of this year (at $1, 81 per square foot).

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“This is the first time median rents have changed since Q3 2021,” Zonder Urban’s Rent Look added.

“We’re also seeing incentives being withdrawn, so this is also having an increase in rental rates,” Brown explained. “The incentives right now are about one month free on a 13-month lease, whereas in previous quarters we’ve seen up to two months free on a 12-month lease.”

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According to the Canadian Rental Housing Index, as a province, Albertans pay more for rent plus utilities (heat, water and electricity) than any other province or territory.

Median rent plus utilities for all incomes in Alberta is $1,279. In BC, it’s $1,148, $1,021 in Saskatchewan, $891 in Manitoba, and $1,109 in Ontario. The median cost of monthly rent and utilities in Calgary is $1,355 compared to $1,264 in Edmonton, according to the CRHI database, brought to you by the nonprofit BC Housing Association.

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But when comparing major Canadian cities, Brown and Cornelius say that Edmonton and Calgary are still more affordable than places like Vancouver and Toronto.

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“Vancouver has a vacancy rate of about one percent, so it’s definitely harder to get a rental unit in Vancouver,” Brown said. “Rental rates are over $3 per square foot, while ours in Edmonton are $1.82 and in Calgary they are $2.57.”

Pardy notes that Edmonton’s 7.3 percent vacancy rate remains “pretty high in a historical sense” and the number of new rental units coming on the market has helped meet demand.

“Housing is generally considered affordable if a household spends less than 30 percent of their pre-tax income on rent plus utilities,” CRHI said.

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Brown said rental properties, especially in city centers, are raising that threshold.

“I heard from several construction crews on buildings, especially in downtown Calgary, that they are now looking at 40 to 50 percent, especially when it comes to a rental rate of around $1,800 for a (apartment) of a room.

“There’s no way a 25-year-old would only spend 30 percent of their monthly income on that. Especially a young professional. There’s no way you can hit 30 percent affordability. Which is sad because spending 50 percent of your monthly income on rent is a huge amount to spend.”

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Brown said people need to determine their priorities and where cost and location fit together.

“If you wanted a more affordable unit, you could look outside the city center,” he said. “It becomes more and more affordable the farther you are from the city center.”

But, as Canadians continue to face high consumer costs — food, goods, utilities, travel — Cornelius says budget decisions are key.

“Over the next six to 12 months, it means renters have to adjust their spending habits.”

Tips for future renters

“I would say start looking early,” Brown said. “I would also say have all your ducks in a row. Make sure you have your previous landlord on board to give you a good look… Make sure you have everything, your deposit, ready too.”

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Brown suggests casting a wider net.

“Don’t focus on a specific area. Maybe look a little further. It only applies to more than one.

“Being flexible on your move-in date also helps…Looking at a 12-month lease for sure, that would help.”

© 2022 Global News, a division of Corus Entertainment Inc.

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