This article originally appears in London Inc. Weekly on January 17, 2020.
ACCORDING TO THE results of the annual Canada Mortgage and Housing Corporation’s Rental Market Survey (RMS) conducted in October 2019, London’s purpose-built apartment vacancy rate declined to 1.8 per cent, down from 2.1 per cent the year prior and sitting at the lowest level in almost two decades.
Released this week, the RMS pointed to a number of contributing factors for the historically low levels, including robust population growth in the London CMA boosted by strong net migration levels, particularly immigrants and non-permanent residents, which include international students.
A red-hot real estate market is also supporting rental demand, as higher home prices, stricter mortgage rules and rising carrying costs are delaying many renters from entering the homeownership market.
Not surprisingly, the historically low vacancy rates have also led to rent price gains in average rents for most apartment types. The fixed sample average rent for the benchmark two-bedroom apartment unit increased 4.9 per cent this year to $1,107 (the average price for a new two-bedroom unit entering the market is $1,213). Fixed-sample average rents for one-bedroom units rose at a slightly stronger rate, while bachelor unit rents increased at the lowest rate.
In terms of geographical areas, the strongest growth in two-bedroom average rent was reported in London East, though rent levels in this area remain the lowest in the CMA regardless of bedroom type.
The survey lists a total of 654 purpose-built rental apartments completed in London in the 12-month period to June 2019, but because the survey accounts for demolitions, renovations and conversions of existing stock (and excludes seniors’ and student housing units), the net increase was pegged at 387 units.
The CMHC expects tight rental conditions and rising prices to continue in London for the foreseeable future, though new projects in the pipeline may ease the gains. CMHC estimates that about 1,500 rental units are under construction and will be added to the London CMA market over the next couple of years.
