Vacancy rates in Calgary's new purpose-built rentals are tightening, and rents are rising.
Published Jan 13, 2023 • Last Updated Jan 13, 2023 • 2 minute read
The secondary rental market generally offers good value with more space, as well as parking and storage often at no additional cost, says Kendall Brown of Zonda Urban. PHOTO BY AZIN GHAFFARI /Postmedia
Rents in Calgary are likely to continue to rise in 2023, building on a strong 2022, driven by economic growth, migration, and higher borrowing costs for mortgages.
“There has been a lot more interest in the rental market,” says Kendall Brown, market analyst for Zonda Urban, adding the trend is likely to continue.
She points to vacancy rates for units less than six years old hovering at about one percent, a downward trend that started in late 2020 when vacancy was at more than six percent.
At the same time, rents for new projects had been increasing modestly throughout 2022.
She notes a one-bedroom apartment’s monthly rent was about $1,700, up 10 percent from 2021, based on third-quarter data. Two-bedroom apartments saw even higher growth, up 17 percent and averaging about $2,300 a month.
Still, the market remains more affordable compared with Toronto where the average price of a new one-bedroom apartment was $2,500, up 19 percent As well, and a two-bedroom apartment’s rent was more than $3,300 a month, rising 16 percent from 2021.
Growing demand pushed prices up in Calgary, particularly amid rising mortgage costs throughout 2022. With mortgage rates expected to remain high, robust rental demand is likely to continue as the price of a home in the city is likely to stay out of reach for many first-time buyers, she adds.
Another change for Calgary is the secondary market — people renting condominiums, townhomes, and single-family detached homes.
“Purpose-built rental market rents have been typically significantly higher,” Brown says. “But there have been huge jumps in rental rates in the secondary market.”
Data gathered by Liv.rent — an online platform for rental listings — show the average rent for an available one-bedroom unit, unfurnished, in the secondary market was $1,498 a month in December, up slightly from November when the cost was $1,472 a month.
Despite the increases, Calgary “is much cheaper” than Vancouver even though rents have increased 23 percent so far this year, says Hazel Wong, an analyst with Liv.rent in Vancouver.
In Vancouver, a one-bedroom cost more than $2,200 in December.
Wong points to migration driving Calgary’s market with AAlberta'sforecast to see record migration with many people moving to Calgary.
“It’s not just international migrants but people moving from other provinces,” she says.
As well, the secondary market in Calgary has received a boost from investors from Ontario, notes Cameron Slavik, condominium market analyst with Zonda Urban.
“Investors propped up the sales total that would have been substantially lower for multi-family in Calgary.”
Of total sales in the third quarter in Calgary, 62 percent were from project launches specifically marketed to Ontario investors, he adds.
“This tells us the affordability of new products for Alberta, in general, is much better than markets like Ontario and B.C.”
Although less costly than in Toronto, new condominiums in Calgary are more costly than units on the resale side. In turn, those Ontario investors must charge higher rents, potentially contributing to higher average rates in the secondary market.r
Higher costs aside, the secondary market generally offers good value for renters with more space, as well as parking and storage often at no additional cost, Brown says.
“In contrast, a new purpose-built, one-bedroom bedroom may cost $1,700 a month, but if you factor in parking and storage, you’re likely paying $200 more.”
