INCREASING INFLATION TO A GROWING POPULATION, EDMONTON’S RENTAL MARKET IS UNDER PRESSURE
Edmonton’s steadily rising population is coming head-to-head with a strained housing market, in which the cost of buying a home has become too high and the supply of rental units has hit its lowest point in a decade.
The pressure of high mortgage rates and inflation have caused a shift in demand from buying a home to renting. And the demand for rentals is expected to surpass new supply, according to David Dale-Johnson, executive professor of real estate at the University of Alberta’s business school.
“Not only do we have immigration coming into Alberta from various places, but we also have people who might normally be thinking about buying a home but perhaps have sold their home and they’re going to the rental market, said Dale-Johnson.
“Or, just going into the [rental] market because they can’t afford the alternative,” he added.
According to the 2024 rental market report by the Canada Mortgage and Housing Corporation (CMHC), the overall vacancy rate for purpose-built rental apartments in Edmonton dropped to 2.4 per cent in 2023 from 4.3 per cent in 2022.
Lowest in a decade
The decline is the lowest vacancy rate Edmonton has seen in almost a decade. It also marks the second consecutive year that major markets across Canada saw strong rental demand that was outpaced by lack of supply, according to the report.
“Currently, the rental system is being affected by a range of factors of higher demand from economic growth and population increases — including students — and the availability of supply,” said Taylor Pardy, CMHC’s lead economist of the Prairies and Territories, in a statement to CBC News.
The rental supply grew slightly in 2023, thanks to the completion of about 2,900 one- and two-bedroom rental apartment units in downtown Edmonton, the western area, and Mill Woods, said the report.
Despite the increased supply, the cost to rent still crept upward. Average cost of renting a two-bedroom apartment in Edmonton rose by 6.4 per cent in 2023 and now sits at almost $1,400 per month, the report said.
Monica Kumar, an Edmonton-based real estate agent for Initia Real Estate and a landlord with several rental properties, says a combination of factors are helping to shift the market toward renting.
Kumar said factors like the cost of lumber and building supplies, a labour shortage in the construction industry and high interest rates have decreased the number of new homes being built.
Last month in the Greater Edmonton area, there were about 4,500 residential homes of all types for sale, including about 2,200 new listings, according to monthly statistics compiled by the Realtors Association of Edmonton.
Of that inventory, there were 1,439 homes sold, with an average selling price of $399,000, it said.
The CMHC report points to the increased cost of homebuying as a reason that many tenants aren’t leaving their rental situation.
Kumar added that some potential buyers will only look at homes with basement suites, since rental income from those spaces is an important factor in affording home-ownership, Kumar said.
“I’m seeing a lot of people switching over to rentals,” she said.
Growing population
Alberta’s population growth is happening at the fastest pace of any province since Statistics Canada began tracking the data in the early 1970s.
In the one-year period ending July 2023, Alberta’s population grew by four per cent — 56,245 people — due to international immigration as well as people moving from other parts of Canada. In December, Alberta notched its fifth consecutive quarter of interprovincial migration gains of at least 10,000 people
The Edmonton region had a population of 1.1 million in 2022, an increase by almost 11 per cent since 2017, according to a provincial dashboard. In its 2023 mid-year report, city economists said high levels population growth expected for 2024 could be a “negative shock” to the housing market.
These days, Kumar said she’s been dealing with an influx of clients moving to Edmonton from Ontario, B.C., and Calgary.
Students, including international students, make-up a small portion of her clients.
Last month, the federal government announced a temporary two-year cap on international student permit visas, a move motivated by federal government both to protect students from unscrupulous post-secondary institutions and address the impact on housing markets in some cities.
It’s not yet known what the cap will mean in Alberta, according to Immigration, Refugees and Citizenship Canada (IRCC).
But Kumar said she’s come across students who are feeling the pinch from the record-breaking vacancy rates.
“I’ve come across some students that found it a little bit hard to find rental properties, just because they go so fast once they hit the market, or they’re very expensive, and they just can’t afford it,” Kumar said.
Story by: CBC News
