Ottawa’s rental vacancy rate held steady in 2018, but the average rent for a two-bedroom apartment rose by its highest level in more than 15 years as rising interest rates and stricter mortgage rules discouraged tenants from buying their own homes and tightened the supply of available units, the Canada Mortgage and Housing Corp. said Wednesday.
At 1.6 per cent, the city’s overall vacancy rate in October was down one-tenth of a percentage point from the same month in 2017, CMHC said in its year-end rental market report. The average rent in Ottawa jumped 5.6 per cent from a year earlier to $1,174, with two-bedroom units costing tenants 5.8 per cent more at an average of $1,301.
That’s the biggest rise in benchmark two-bedroom rents since 2001, the agency said.
“Mortgage rule changes together with rising interest rates likely led to lower turnover rates this year as households chose to continue to rent over transitioning into home ownership,” CMHC said, noting that asking rents on vacant two-bedroom units were 22 per cent higher than rents on occupied units.
“Rising asking rents also pressured down turnover rates, as more households were discouraged from finding other rental accommodations.”
The overall inventory of rental housing in Ottawa grew slightly year-over-year, CMHC said, with the city adding 527 new units to its stock of slightly more than 62,000 apartments.
The national housing agency said a number of factors drove the steady demand for rental accommodation, including “robust” population growth of about 2.2 per cent in 2017. In particular, the agency cited “healthy immigration levels” that saw the number of newcomers to the region from outside Canada rise 13 per cent year-over-year.
CMHC also pointed to a 19 per cent rise in international students compared with a year earlier as another key ingredient, along with strong employment growth in the 15-to-24 and 25-to-44 age groups.
“These two (age) groups are key to the rental market as they are often students and young professionals who have yet to make the transition into homeownership,” the agency said.
Vacancy rates dropped in six of the 15 rental market zones surveyed, with the largest declines in Nepean, followed by Sandy Hill/Lowertown. The rate in New Edinburgh/Manor Park/Overbrook, where 277 new units were added in 2018, saw the biggest jump.
Gatineau in demand
Across the river in Gatineau, the vacancy rate dipped from more than three per cent a year ago to 1.2 per cent in October, CMHC said. The average rental rate rose nearly three per cent to $770, with two-bedroom units going up 3.5 per cent to $794.
The agency said a strong job market, robust net migration and a dampened appetite for home ownership helped fuel demand on the Quebec side of the National Capital Region. That sharp rise in rental traffic more than offset a significant increase in the supply of new units, CMHC noted.
Gatineau added 922 new units to its inventory from July 2017 to June 2018, more than double the number built in the same period a year earlier. That brought the total number of rental apartments in the city to 22,103.
The report also said it was too early to assess the impact of September’s tornadoes on Gatineau’s rental market. Hull’s Mont-Bleu neighbourhood, which has a high concentration of rental accommodations, was the hardest-hit region of the city.
Nationally, Canada's overall vacancy rate dropped for a second year in a row as demand for rental housing grew at a faster pace than supply, CMHC said.
The housing agency says the vacancy rate across the country was 2.4 per cent, down from three per cent in 2017.
CMHC says demand for rental housing grew at a faster pace than supply. It found that the number of occupied units climbed by 2.5 per cent in October 2018, compared with an increase of 1.9 per cent in the same month a year earlier.
Ontario, B.C. and Manitoba all saw an increase in its vacancy rates, while Quebec, Alberta, Saskatchewan and the Atlantic provinces all saw declines.
The report found the average rent for a two-bedroom apartment jumped by 3.5 per cent from October 2017 to October 2018. This increase was higher than the inflation rate during this period.
B.C. saw the largest climb in rent, with Kelowna recording an 9.4 per increase. Saskatchewan, the province with the highest vacancy rates, saw rents go down slightly.
In October, Vancouver had the highest average monthly rent for a two-bedroom apartment at $1,649, followed by Toronto at $1,467 and Calgary at $1,272.
Trois-Rivieres, Que., had the lowest average monthly rent in October at $601, followed by Saguenay, Que., at $608 and Sherbrooke, Que., at $639.
– With files from the Canadian Press