New rentals have highest vacancies
February 2, 2021
New apartment rent slower than older units.
While rental vacancy rates have increased across Canada, this rise is mostly apparent in new purpose-built rental projects completed over the past few years, according to the Rental Market Report 2020, released January 28 by Canada Mortgage and Housing Corp.(CMHC).
The findings may stunt an appetite for new rental construction that has been seen in most major Canadian cities over the past few years.
In the city of Toronto, for example, the overall apartment vacancy rate rose to 5.8 per cent in 2020, but the vacancy in apartment buildings completed since 2005 is 11.6 per cent. The main reason is the that average rent in a new Toronto apartment building is $2,237 per month, compared to a city-wide average of $1,613.
The same scenario is taking place in most cities. While the Metro Vancouver vacancy rate increased from 1.1 per cent in October 2019 to 2.6 per cent in October 2020, the vacancy rate for new rental buildings spiked to 6.2 per cent, the report found.
In the City of Vancouver, the vacancy rate for new rental buildings soared from 1.4 per cent to 8.7 per cent, year-over-year, the CMHC annual survey found.
In Calgary the 10.1 per cent vacancy rate in new apartment buildings is more than twice as high than in older apartment buildings with a 4.4 per cent rate, and is higher than the overall rental rate of 6.6 per cent. Rents in new Calgary apartments average $1,474 per month compared to $1,181 for older stock.
Bob Dhillon, CEO of Calgary-based Mainstreet Equities, one of Canada’s largest landlords, has doubts about the current purpose-built rental curve that has ramped up across Canada. Rents required for the fancy new towers are often not affordable for average Canadians, especially in Vancouver or Toronto, he believes. “The developer may need $2,600 per month for a one-bedroom, but local wages are not high enough to afford it,” Dhillon said.