Recent statistics shows that rental vacancy rate in Canada has been falling since the last quarter of 2018 due to increasing demand that cannot be accommodated by the present supply. Daniel Greenhalgh weighs on the intricacy of this issue.
According to the Canada Mortgage Housing Corporation, the vacancy rate has been dropping for the past two years. This is because the demand for rental housing increases faster than the supply. For instance, just in October 2018, the number of occupied units across the country jumped to 2.5%, which is relatively higher than the 1.9% occupancy rate in October of the previous year.
For developers, it is important to know the drivers of this demand. Understanding this will help you decided whether it is time to invest in the industry or not. Here are some of the factors affecting the demand of high end rentals, according to known land developer, Daniel Greenhalgh.
What are the factors affecting the demand of high end rentals in Canada?
The more people migrate to Canada, the higher the demand for high end rentals will be. Statistics show that the increase in the demand for rental houses in the past two years is driven by the high volume of international migrants.
Just for the first half of this year, international migration already climbed up to 23%. This is one of the biggest factors affecting the demand for rental housing since newcomers usually prefer to rent while they are settling down.
Rental housing is also in-demand for those who migrated for work purposes. Since their jobs are mobile, they opt to rent than to buy their own home.
As greater job opportunities arise for the youth, more young people move out of their parents’ homes and find a place of their own. Of course, these young people prefer to rent first while they are still in the early stage of entering adulthood.
According to population statistics, there had been an increase in the employment rate of 15 to 29 year olds in Canada, which boosted the demand for rental housing.
Low interest rates mean low mortgage fees. Therefore, higher rates lead to higher mortgage fees, which push people to prefer renting than buying their own home, particularly in the biggest cities in the country. Although the increase in demand in rental housing causes the prices to go up, it still seems to be relatively higher than paying the mortgage.
This factor need not be explained deeply. When housing prices are higher, people tend to prefer renting out homes. Housing prices are usually influenced by the demand and supply relations, the interest rates, and even the credit availability in the area.
These are just some of the factors affecting the demand for high end rentals, according to Daniel Greenhalgh. For players in the real estate industry, particularly the developers, it will be helpful to understand these factors and look at the trends. However, it is likewise important to note that there are other factors that may influence this demand such as changing preferences of the target populations, and other unprecedented instances.