In the third installment of Western Investor’s new Weekly Buzz feature, we’ve curated the top buzz-worthy articles from Canadian coverage of the commercial real estate sector. The subject on everyone’s mind this week is the annual release of the Canadian Housing and Mortgage Corporation’s (CMHC) Rental Market Report, which impacts commercial real estate’s multi-family market. There was also continued chatter surrounding government’s recently introduced policy changes affecting homeowners and investors alike, such as a mortgage “stress test” and increased sales taxes.
The CMHC’s new report showed a slight national increase in the rental vacancy rate over last year. The overall increase in demand was offset by new rental supply coming onto the market in 2016. The rental vacancy rate for October 2016 was 3.4 per cent, just a touch above October 2015’s 3.3 per cent. Those figures were based on CMHC’s survey of Canada’s 34 largest population centres. Taking a mirco-view, the rental vacancy rate in Metro Vancouver decreased, as the vacancy rates in The Prairie provinces swelled.
Here’s what some media outlets had to say about the new national report, as well as B.C.’s mortgage and tax rule changes.
End the unfair, unprecedented government attack on home ownership – Western Investor
Our first story comes directly from WI editor Frank O’Brien, who takes on a polarizing issue – should the B.C. and federal governments have interfered with the housing market by introducing policy changes? O’Brien doesn’t think so.
This year the B.C. government has virtually banned residential assignment sales, slapped a discriminatory tax on foreign buyers and jacked up sales taxes on higher-end homes. The City of Vancouver is moving to ban short-term rentals and joined other municipalities in raising bureaucratic barricades to new home construction and renovations.
The results have been predictable and disastrous for British Columbia’s residential industry.
By October, housing sales in Metro Vancouver had plunged 70 per cent from the spring and B.C. housing starts had fallen to a 16-year low. At least 25 per cent of first-time buyers can no longer qualify for a mortgage and home owners have had their equity cut from beneath them.
It is a credit to home buyers’ resilience – and recognition that owning a home is about the only route to financial security – that national housing sales recently hit a record high despite every government effort to kill them.
We suggest that, instead of undermining the vital housing industry, governments should get out of the way and let Canada’s home buyers and investors make their own decisions on what they want and what they can afford.
Metro Vancouver apartment vacancy shrinks; Surrey sees most dramatic drop: CMHC – Business in Vancouver
Canadian media was inundated with coverage of this week’s CMHC’s report release, with Business in Vancouver taking a look at how it affected the region as a whole – a region that is consistently affected by a very low vacancy rate, due to a strong job market and a sizable chunk of millennials. The rental vacancy rate in Metro Vancouver decreased from 0.8% to 0.7%, mostly due to shrinking rates in the suburbs.
The decrease wasn’t coming from within the City of Vancouver itself, however, as vacancy actually increased slightly in Vancouver alone. In the Downtown/West End area, the rate increased from 0.5% to 0.6%. In the rest of the city, the rate grew from 0.6% to 0.8%.
The region’s tightening vacancy rate was driven by declining availability in the suburbs, and the most drastic drop was found in Surrey. Last October, that city had an apartment vacancy rate of 1.9%; this year, the rate plunged to 0.4%. Vacancy also fell in Burnaby (October 2015: 1.2%, October 2016: 0.8%) and New Westminster (October 2015: 0.9%, October 2016: 0.4%).
6.4% rent increase in Metro Vancouver is highest ever recorded: CMHC – Metro News
The release of the CMHC report came some record-breaking information. As reported by Metro, the rental rate increase from 2015 to 2016 hit an all-time high of 6.4 per cent.
Rent rates normally increase at about the same rate as British Columbia’s provincially regulated cap on yearly rent increases, which is currently 2.9 per cent.
But last year, rents rose 3.9 per cent, outstripping the rent cap. That trend has continued in 2016, said Robyn Adamache, principal market analyst for CMHC.
“2008 was the last time we had an increase in rents of more than 4 per cent, and that’s when the vacancy rate was 0.5 per cent,” Adamache said. The 6.4 per cent increase between 2015 and 2016 is “the highest I’m seeing back to 1992.” The highest rent increase in the region was in the City of Vancouver, at 7 per cent.
As a comparison, rents in the Greater Toronto Area increased 3.1 per cent.
Apartment vacancy rate in Calgary hits 25-year high – Calgary Herald
CMHC’s report also showed some record-setting results for Calgary’s rental market. According to the Calgary Herald, the city’s saturation of supply during a time of high unemployment has caused the city’s rental vacancy rate to soar to a high not seen since the early 90s. This has also forced landlords to offer incentives and cut prices.
“The vacancy rate has moved well above historical averages largely due to a rise in supply,” Richard Cho, analyst with the housing agency, said in a statement.
Calgary was home to 36,500 apartments last month, up by 1,300 units or nearly four per cent over year-ago levels. It was the biggest annual gain in 22 years and the third straight year of expansion in the rental market.
The construction boom came as oil prices remained persistently low, sparking widespread unemployment. The city’s jobless rate hit double digits in October for the first time since 1993, rising to 10.2 per cent.
“Economic conditions in Calgary have deteriorated in 2016 as the price for oil has remained relatively low, holding back some gains in rental demand,” the housing agency said in its report. “Job losses have spread beyond the energy sector and into other areas of the economy.”
The agency notes the city’s economy shed 21,000 jobs at the end of September, compared to levels from a year earlier, representing a 2.6 per cent decline in total employment.
As reported by Western Investor, the decline in employment and rise in rental vacancy has forced landlords to offer incentives and cut prices.