Rents Up, Vacancies Down, 2012 Looking GREAT!

I just received a copy of the CMHC’s Rental Market Report for the Calgary Region and all I can see in it is good news! Unfortunately, it has no details on the surrounding areas, but we all know what affects Calgary, also affects the surrounding areas like Chestermere.
Now I’ve been talking about how the number of vacancies out there has been decreasing for months now and this report confirms it. Not only have they seen the apartment vacancy rate drop to 1.9%, but also they are seeing rents increase. It’s only a little bit, but as vacancies remain below the 2% mark, you will be sure to see this trend increase.
They also have separate breakouts for both condominiums that are rented out (and there is some very interesting data there, which I will address shortly) along with townhouse rentals. The townhouse rentals are paralleling the apartment world and vacancies are down to 2% from 3.7% the same time last year.
These low vacancy rates point to a situation where demand is surpassing availability and we all know what happens when this occurs. Prices increase! If you currently have rental property and have been using fixed term leases of 10 month terms, 2012 will be the perfect time to increase. With increased taxation, higher insurance costs and increases with just about everything else, this will be some pleasant relief for many landlords out there.
Which brings be full circle back to the condominium markets. The vacancies in this sector of the market are an aberration when compared to other properties and help to point out what a unique market they are. The report shows us that condo vacancies remain unchanged from last year and are still at a relatively high 5.7%, which seems to conflict with what is occurring everywhere else in the market.
So, what could be behind this? Well there are several reasons in my opinion. To start with, we have to remember how overbuilt the condo market became during the boom. Between condo conversions of existing buildings and completion of purpose built condo towers, many of these projects didn’t arrive onto the market until well after the markets had slowed down.
This left the market with a dearth of units that often fell into the higher pricing zone of rental properties. So we had an oversupply problem.
These units often needed to rent at points in excess of $1,200 a month just to break even and the tenant base for properties of this magnitude simply isn’t there yet. So we also had properties that were overpriced!
Finally, many of these condo owners who had jumped on board anticipating using these properties as either quick turn flip properties or anticipating a very eager rental market discovered instead a down market. This suddenly put them in the position of trying to market a vacant rental property against large apartment rental companies or other more experienced landlords.
They simply didn’t have the marketing savvy or the bigger budgets to appear everywhere like the Boardwalks of the apartment business. So now, they were overpriced in an over supplied market and they were completely uncompetitive as well. It’s no wonder vacancies didn’t change and it’s amazing they didn’t actually increase.
All of this however is going to be ancient history very shortly as the overall vacancy rates continue to decrease. Alberta continues to be a hotbed of economic activity and this will continue to draw people to the province putting further pressure on vacancies.