March 1, 2012 – Market Update
There is no doubt that the rental vacancy rate in central Alberta is down, and like house prices, rental rates rise when supply decreases and demand increases. The other thing that low vacancy rates and higher rents does, is encourage renters to buy homes. The current environment of low interest rates and a decent supply of starter homes makes this an ideal time for that scenario.
Rents on the Rise? Todd Hirsch, Senior Economist, ATB Financial
While the housing market tends to steal the show when it comes to economic indicators, the apartment rental market still provides accommodation for hundreds of thousands of Albertans. Apartment rents have remained fairly steady over the past few years, but with another economic boom underway in Alberta, that could change.
According to the Consumer Price Index, rental accommodation in the province stood at an index level of 123.1 in January 2012 (with 2002=100).
The graph below shows the steep climb in rental rates through the boom years of 2006 and 2007, when at the time apartment vacancies were extremely low and landowners could command higher rents. In those years, thousands of Canadians from other parts of the country were flooding into Alberta for work. And as inter-provincial and international migrants tend to rent when they first arrive, they strongly influenced the rental market.
When Alberta slammed on the economic brakes in 2008, apartment vacancies rose and rents levelled off. In fact, on a provincial average, rents actually decreased somewhat through 2010. The province suffered a couple of quarters of net out migration to other provinces.
Now, however, Alberta has regained its traditional position of a destination province, largely due to the strong labour market. And as a result, apartment rents have started to creep higher in the past few quarters. That could be a trend in the coming months and years if the economy continues to perform well.
