The rental market pendulum is about to swing back in favor of tenants. Real estate investors take note.
2013 marked the fourth consecutive year that the vacancy rate declined in the Calgary CMA, falling to a multi-year low of only 1% which contributed to higher rents. Those market dynamics are now shifting.
Josh White, a Senior Policy Advisor for the Mayor, tweeted that there was a “massive number [of units] coming on in the next 2-3 years. Thousands. Welcome relief to this market.”
That’s not hyperbole.
According to Ian Meredith, a Senior Market Analyst at Atlus Group, the number of rental unit completions in Calgary over just the first quarter of 2014 exceeded any annual total from the past 25 years.
Mr. Meredith explains that rental completions over the first three months in 2014 reflects the 2012 jump in starts and that there’s a solid rate of starts again this year with lots in pre-construction.
An influx of rental supply will reverberate throughout the entire real estate market, including resale. It may have already started.
Twenty-nine per cent of the Condo-Apartments for sale in Calgary on MLS® right now are tenant occupied and/or have tenant rights, compared to only 15% for single family homes. An additional 29% of the apartment units listed are vacant, and almost 8% more are either new, never occupied or showhome units.
With nearly two-thirds of the Condo-Apartment MLS® inventory either vacant, new or tenant occupied, it seems that many landlords and investors are cashing out. Fortunately for them, the Condo-Apartment resale market is still in seller’s territory commanding prices that are just shy of 2007 peak levels.
However, CREB expects we should see further gains in new listings as prices continue to improve.
More rental units on the way and increasing numbers of Cond0-apartments for sale should help ease Calgary’s real estate crunch to more balanced conditions. The question is will the market simply moderate or, as we’ve experienced over the past decade, continue with a propensity for extremes.