Although developers and landlords sometimes beg to differ, spiking mortgage rates, migration and other factors have triggered a perfect storm of Calgary housing affordability.
The situations, and the factors, are complicated but CMHC, housing experts and economists detail a certain cause-and-effect about Calgary housing and rental unaffordability. Across the country, high interest rates have left would-be homeowners renting rather than buying, driving up demand in the rental market.
Stable youth employment has also boosted demand, as has an uptick in net migration, the report said, given that young people and new immigrants tend to rent rather than buy. But every region has its own unique factors driving up the cost of rent, from an improved economy in the West to the impact of students returning to campus in college towns.
The formula shows higher mortgage rates combined with soaring house prices, equals historic low rental vacancy and high rental rates, making Calgary a red-hot rental market.
“It’s happening in Calgary and in most major markets throughout Canada,” notes Shamon Kureshi, director of the Calgary Residential Rental Association (CRRA) and president and CEO of Hope Street Management Corporation. “The rental markets are hot. There are numerous micro reasons at play to cause this condition, and we recognize the role of rising interest rates to be among the most significant. Specifically, the increased acquisition and carry cost of home ownership caused by higher rates has forced many potential new homeowners to remain in the rental market. This increases both demand and prices for rental homes.”
Even now, mid-summer 2023, high interest rates continue to be a spikes in-progress situation. While detailed updates are only issued quarterly by CMHC, the stats, trends and numbers from the first half of the year track that, provincially, rent inflation hit double digits in almost every province.
Rents in Ontario, Alberta, British Columbia, Quebec and Manitoba rose 17.1, 13.4,13.2, 12.2 and 12.6 per cent respectively.
Calgary, Toronto and Vancouver topped the list of annual rent inflation amongst Canada’s largest markets, with rates climbing 24.9, 22.4 and 18.7 per cent respectively.
While the price of rent in Calgary varies depending on several variables including the unit size, number of bathrooms and the location, the numbers show that the average rent for a two-bedroom apartment is $2,015. A three-bedroom apartment is $2,475.
CMHC stats also show that Vancouver and Toronto remained the two priciest rental markets, with average Vancouver rentals at $3,146, and $2,818 in Toronto.
The most recent CMHC housing report highlighted differences in what’s fuelling rental demand throughout Canada, but also plenty of similarities. As interest rates go up, it becomes more difficult to buy, pushing more people to rent for longer.
Also the significant factor of people moving into – and within – Canada, for school, work or in search of an affordable place to live. The trends underscore that it all leads to heightened demand in various markets, even those where inexpensive apartments have historically been fairly easy to find.
The CMHC numbers are also crunched to illustrate one major similarity in what is expected to solve the affordability problem: more housing supply. The report reinforced the urgent need to accelerate housing supply and address supply gaps to improve housing affordability for Canadians.
The vicious circle of mortgage rates, migration and affordability are the culprits, CMHC highlights the impact of migration as a rental factor not to be underestimated. The trends and numbers are undisputable.
Rental demand is buoyed by a record-high levels of both immigration as well as an uptick of ‘in-migration’ – particularly younger demographics moving to Alberta, and especially Calgary – from elsewhere in Canada.
“This provincial migration is significant, because we haven’t seen this for many years,” explains Michael Mak, CMHC’s housing economics specialist for the Alberta region. “What makes today different from previous boom times, is that the current economic growth isn’t entirely linked to strong commodity prices, though those certainly played a role. Employment has also grown in other sectors, especially technology. Today there is a much more diversified economy.”
He points out that in-migrants are generally less likely to rent and more likely to purchase homes, although the trend contributes to the high cost of Calgary rents. “Local residents are having to stay in rentals longer just so that they can step up to buy a home.”
The CRRA’s Shamon Kureshi admits some key reasons why Calgary is a very low vacancy and hot rental market. “The high mortgage rates cause increased demand from renters who can’t afford to buy homes. And also inward migration from other provinces, because Calgary offers some of the most affordable rental housing of any large centre in the country.”
Only educated guesswork can forecast how long Calgary’s hot rental market can last. “We generally see an increase of available inventory by fall, as the summer draws to a close. It is seasonal and not especially related to any economic conditions like mortgage rates and home prices,” he says.
“We know that families tend to move during the summer months while kids are not in school, the post-secondary market tends to absorb much inventory as the school semester approaches creating a trickle-down effect to increase the market tightness. And moving in the middle of a Canadian winter is tough.”
