Rental market softens

By Harley Richards - Red Deer Advocate

Published: June 06, 2008 6:18 AM

0 Comments The challenge of finding rental accommodation in Red Deer has eased, according to Canada Mortgage and Housing Corp.’s spring rental market survey.

The national housing agency reported on Thursday that the average vacancy rate for apartments in the city was 3.2 per cent in April.

That compares with 2.1 per cent in April 2007.

The vacancy rate for bachelor units jumped from 2.5 to 5.3 per cent during this one-year period. For one-bedroom apartments it went from two to three per cent, and in the case of two-bedroom suites, the figure rose from three to 3.2 per cent.

Bucking the trend were larger apartments with three or more rooms. Their average vacancy rate decreased from 5.4 to 2.9 per cent.

Regine Durant, a CMHC market analyst in Calgary, said the average vacancy rate in Red Deer was the fourth highest of the 17 larger urban areas in Alberta considered.

Grande Prairie, Brooks and Edmonton had higher averages.

She said reduced natural gas drilling activity, a decline in the number of people migrating to Alberta and a record number of local housing starts in 2007 trimmed demand for rental accommodation. Also, the number of rental units in Red Deer is up 17 per cent over last year.

Durant added that there are large inventories of new and existing homes on the local market.

Provincewide, CMHC concluded that the average vacancy rate in urban centres with 10,000 or more people was 2.9 per cent in April, as compared with a figure of 0.9 per cent a year earlier. Among the communities looked at were Sylvan Lake, which had an average vacancy rate of 1.5 per cent, and Lacombe, which came in at 1.2 per cent.

Ed Tkachuk, business manager with Hearthstone Property Management Inc. of Central Alberta, said CMHC’s numbers seem low.

“I know of buildings in Red Deer with 15 per cent vacancy rates today,” he said, adding that he heard about one building that’s 40 per cent vacant.

Tkachuk suggested that CMHC’s figures might be skewed because not all landlords and property managers disclose their vacancy rates.

Richard Corriveau, a CMHC economist for the Prairies and Territories, said his agency was unable to obtain information for 5.8 per cent of the units it surveyed — which equates to about 284 suites.

“Our 94-plus per cent response rate gives us a very reliable vacancy rate estimate,” he said.

Corriveau added that CMHC only considers structures of which half or more are designated for rental. Consequently, a basement suite in a house, or rental units in a condominium that is predominantly owner-occupied, would not be included.

Regardless, Tkachuk said renters now have much greater choice. This is particularly true in the case of one- and two-bedroom apartments, he said.

“There’s still a huge demand for single-family homes.”

Despite the higher average vacancy rate in Red Deer, rents here still appear to be rising. CMHC’s survey revealed year-over-year increases for all apartment types, with the average for bachelor suites up 3.6 per cent to $570, one-bedrooms jumping 8.7 per cent to $723, two-bedrooms climbing 5.3 per cent to $866, and apartments with three or more rooms rising 11.8 per cent to $1,013.

Durant attributed this to the continued high prices of new and existing homes, which prevents many renters from buying.

The average rent for two-bedroom apartments across Alberta’s largest communities was $1,049 in April, up 12.6 per cent from a year earlier. The numbers ranged from $2,350 in the Regional Municipality of Wood Buffalo (Fort McMurray) to $670 in Medicine Hat.

In Sylvan Lake, it was $757, while in Lacombe the figure was $679.

“That seems really low when you look in the newspaper or online,” said Tkachuk, referring to CMHC’s averages for Red Deer and Sylvan Lake.

He noted that more higher-end properties are going up for rent, a consequence of investors taking advantage of buying opportunities on the real estate market.

Contact Harley Richards at hrichards@reddeeradvocate.com