Historically low vacancy rates drive rents to all-time highs

By: Zandile Chiwanza on January 15, 2020

The vacancy rate for purpose-built rental apartment units declined for a third year in a row to 2.2% down from 2.4% in 2019 for all-bedroom types, according to Canada Mortgage and Housing Corporation’s (CMHC) Rental Market Survey (RMS) released today.

The decline is the result of strong rental demand continuing to outpace growth in supply across all areas of the country. The federal housing agency conducts its rental market survey every October to estimate how economic, demographic and other factors impact Canada’s rental markets.

Rent increases significantly above the provincial guideline

“Tighter rental markets were accompanied by strong rent growth, with average rents increasing by 3.9% for a two-bedroom apartment between October 2018 and October 2019 … the fastest pace of same-sample rent growth since October 2001,” the CMHC report says. 

“Low vacancy rates in major centres underscore the need for increased rental supply to ensure access to affordable housing,” said Bob Dugan, CMHC's chief economist in a press release.

The average rent in Toronto for all bedroom types is $1,452 up by 6.8%. The Rental Market Report for the GTA says, “tight rental market conditions allowed landlords to charge new tenants higher rents and in turn, average rent growth in the GTA significantly exceeded the provincial guideline of 1.8% for 2019.”

Despite the record construction of new units in Vancouver over the past year, the overall vacancy rate remains unchanged (1.1%). However, the average rent went up by 4.7 % to $1,469, which was more than the provincially-allowable increase of 2.5% in 2019.

Prospective tenants in Vancouver face ridiculously higher rents than long-term tenants, with the average asking rent for vacant units hitting an average $1,771. 

That’s 20.8% higher than the average rent paid for occupied units ($1,466) in October 2019. 

Meanwhile in Montreal, the vacancy rate reached a 15-year low (1.5%), driving the national decline. Montreal residents pay $841 on average (up by 3.6%)

The vacancy rate also declined in Halifax (1.0%).

Vacancy rates in most other CMAs remained stable, including the major prairie markets of Calgary (3.9%), Regina (7.8%), and Winnipeg (3.1%).

CMHC concludes “low vacancy rates in major centres illustrate the need for increased rental supply to ensure people in Canada have access to affordable housing.”