If you’re looking for a place to live in Alberta’s major cities, it’s starting to get more challenging.
Taylor Pardy, senior market analysis for the Canada Mortgage and Housing Corporation, said Alberta’s major urban centres are expected to see gradual increases in rental rates and decreases in vacancy rates over the next couple years.
“For Edmonton in particular, we are anticipating some stronger rental demand,” he told Global News on Wednesday. “Part of the reason behind that is rising mortgage rate… it may result in some people delaying their purchasing decisions and perhaps staying in a rental longer.
“Other forces on the rental market — like stronger population growth in Alberta with variables like inter-provincial migration being more strongly positive since the middle of 2021 — that’s generally supportive of population growth, especially in the larger metro centres, and is historically co-related in downward movements in the vacancy rates and gradual increases in the rental rates.”
Feeling anxious about rising inflation? Interest rates? Here’s what to do
Statistics Canada’s Consumer Price Index (CPI) for July 2022 shows that the cost of buying a home or renting one has gone up. As mortgage costs increase with higher interest rates, the report notes rent prices accelerating, rising faster in July than the previous month.
The report, released Tuesday, found that mortgage interest cost index increased (by 1.7 per cent) for the first time since September 2020 on a year-over-year basis and that rent increased by 4.9 per cent in July compared to the same month in 2021. That rental increase came after a 4.3 per cent hike in June.
Ontario and Alberta had the fastest rental increase, the CPI found.
Canada’s inflation rate dips for the first time in a year
Rishab Mehra is an international student from India who is starting classes at the University of Alberta in September. He’s been trying to find a place to rent off campus with roommates but says it’s been really competitive and frustrating.
“Some of them are being taken up really quickly if they’re close to the university,” he said. “All of us went to a place, we really liked it. I was like: ‘I just need to take a quick video of the place and I’ll be back.’ By the time I was back, there were some other people there and they had already took the place.
“For me personally it’s been very hard… I just hope I find a place as soon as possible.”
He said he’s having to account for water and power, as well as furniture, in his budget considerations.
“For an average two-bedroom apartment, it would be about $1,700 to $1,800.
“I found a good place. It was $1,500 and I was like: ‘I’m going to go for it,’ but utilities were not included… And on top of that, none of the apartments are furnished.
“I don’t know how I’m going manage bringing all the furniture to that place and furnishing the whole place.”
Canada’s housing market is cooling as rates rise. But rents have never been hotter
“It’s a push and pull between the rental market and the for-sale market in all the markets we track,” said Jackson Cornelius, a director with Zonda Urban, formerly Urban Analytics.
“It’s largely based on affordability. I think we’re seeing a bit of a perfect storm here with the general housing supply issues that are taking place in… Greater Vancouver and Greater Toronto Area and forcing people to take a second look at where they decide to live based on affordability.
“That’s led to is a substantial increase in inter-provincial migration into Calgary and Edmonton — and throughout Alberta — in search of more affordable homes.
What higher interest rates mean for renters
A more restrictive housing market means fewer people will be able to own homes and will instead rent, Cornelius explained, pointing to the Statistics Canada report.
“As housing values increase, you’re just naturally going to squeeze out some of the higher-price-sensitive consumers. When that happens, compound that with back-to-back-to back interest rate hikes, that will cause… people to remain in the rental market.
“Or it will sometimes cause — if interest rates rise — people to sell their homes because they can’t make their mortgage payments anymore and move into rental units.”
Canada’s inflation rate cooled to 7.6% in July as gas prices dropped
Zonda Urban’s Q2 2022 Rental Take described Calgary’s recent rental demand as “record breaking.” Overall, average vacancy dropped to 5.6 per cent (a 4.5 per cent year-over-year decrease) and average rental rates increased by 13 per cent (to $2.57 per square foot).
“We’ve definitely seen an increase in activity in the rental market,” said Kendall Brown, manager of rental data market for Alberta and Ontario with Zonda Urban.
“In Calgary specifically we’ve seen average monthly rental rates increase by about $200 a month. In Edmonton, we’re also seeing rental rates increase, not as significantly as in Calgary.”
Calgary’s hot housing market creating rental crunch
In Edmonton, Zonda Urban found overall vacancy dropped 2.9 per cent from this time last year to 7.9 per cent and average rental rates have increased by four per cent from Q1 of this year (to $1.81 per square foot).
“This is the first time that average rents have changed since Q3-2021,” Zonder Urban’s Rent Look added.
“We’re seeing incentives being pulled back as well so this is also having an increase in the rental rates,” Brown explained. “Incentives right now are around 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.”
Students face surging rental market ahead of fall return to classes
According to the Canadian Rental Housing Index, as a province, Albertans pay the most in rent plus utilities (heat, water and electricity) than any other province or territory.
Average rent plus utilities across all incomes in Alberta is $1,279. In B.C., it’s $1,148, it’s $1,021 in Saskatchewan, $891 in Manitoba and $1,109 in Ontario. The average cost of monthly rent and utilities in Calgary is $1,355 compared to $1,264 in Edmonton, according to the CRHI database, which is presented by the BC Non-Profit Housing Association.
University of Calgary dealing with student housing shortage
But, when you compare major Canadian cities, Brown and Cornelius say Edmonton and Calgary are still more affordable than places like Vancouver and Toronto.
Pardy points out Edmonton’s 7.3 per cent vacancy rate is still “fairly high in an historical sense” and the number of new rental units coming onto the market has helped meet demand.
“Housing is typically considered affordable if a household spends less than 30 per cent of its before-tax income on rent plus utilities,” CRHI said.
35,500 low-income Alberta households expected to benefit from 10-year rent subsidy program
Brown said rental properties, especially in city centres, are raising that threshold.
“I’ve heard from multiple building staff at buildings especially around downtown Calgary, they’re now looking at a 40 to 50 per cent, especially when you’re looking at a rental rate of around $1,800 for a one bedroom (apartment).
“There’s no way that a 25 year old is only spending 30 per cent of their monthly income on that. Especially a young professional. There’s no way you can hit the 30 per cent affordability. Which is sad because spending 50 per cent of your monthly income on rent is a huge amount to be spending.”
July 2022 Inflation rate reaction
Brown said people need to determine their priorities and where cost and location fit in.
“If you wanted a more affordable unit, you could look outside the city centre,” she said. “It gets increasingly more affordable the further you are from the city centre.”
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 prospective 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 review… Make sure you have everything, your deposit, ready to go as well.”
Brown suggests casting a wider net.
“Not focusing on one specific area. Maybe look a little bit further out. Just apply to more than one.
“Being flexible on a move-in date helps as well… Looking at a 12-month lease for sure, that would help.”
© 2022 Global News, a division of Corus Entertainment Inc.