March 3, 2022
Falling Vacancy Rates Spark Rising Rental Rates
Rental properties in Calgary have become a wise investment vehicle for investors as vacancy rates continue to drop in the city while average monthly rents continue to rise.
A recent report by Canada Mortgage and Housing Corporation clearly shows the strong rental fundamentals in place in Calgary’s residential real estate market.
It said rental vacancies lessened considerably in 2021, with average vacancies falling to 5.1 per cent from 6.6 per cent in 2020. Vacancy rates were not only affected by demand but also by growth in rental supply.
According to the Rental.ca February 2022 Rent Report, the overall average rent in Calgary in January was $1,422, which was up 2.3 per cent from a year ago. Nationally, the average rent was $1,807, up 4.4 per cent year-over-year.
“The fear that the Omicron variant would derail the economy and lockdown the country again has subsided, with tenants again out looking for a place to rent,” said the report. “Many municipalities across Canada are experiencing substantial annual increases in average rent, which must be viewed in light of the fact that average rents fell off a cliff during the worst of the pre-vaccine pandemic, so comparisons this year will skew high.
“The largest growth continues to be for single-family rentals, as many potential buyers choose to rent, fearing the ownership market has gotten too frothy. Potential government intervention in the ownership market and future interest rates hikes play into their decisions to rent. The second reason single-family rentals are rising is an increase in investor activity in a more upscale single-family product, which necessitates higher rents.”
Calgary’s rental market has been buoyed by a number of key factors.
First, Alberta’s economy is picking up and some economic experts have forecast that it will lead the country in growth this year. That has a domino effect, leading to gains in employment.
Also, Calgary, and the province, are seeing gains in their populations through natural birth, increased levels of immigration and elevated net interprovincial migration numbers.
On top of that, more people are also choosing to rent as a lifestyle choice and many are being priced out of homeownership due to rising prices as well as the rising costs of being a homeowner. And interest rates are going to be increasing this year.
While demand continues to grow for the rental market in the Calgary region, there also continues to be a lack of supply that is not keeping pace.
Another factor in the growth in rental demand is the lack of inventory in the resale housing market right now in the city and demand for homes is skyrocketing. Following a record year for MLS sales in 2021, year-to-date in 2022 is seeing transactions up by more than 70 per cent compared to the same period a year ago.
Because of the tight inventory in the resale market, many people may be choosing the rental market right now until more homes are listed for sale.
All those factors are good news for investors in Calgary’s rental real estate market with rents likely to continue to rise in the near future.
Chris Chornohos has a passion for real estate and helping his clients reach their business goals by providing Real Estate Investors and Owners with the first class valuation and advisory services to close more deals. Chris is also an investor, builder and developer. Reach out to Chris today to help with your Real Estate needs.
E: Chris.Chornohos@nmrk.com W: www.chrischornohos.com
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