Lifestyle choices and economics are playing a major role these days in driving rental demand in Calgary, according to a report by Urban Analytics, a real estate research firm.
The report says Calgary’s rental apartment market remains active with the B20 mortgage stress test rules continuing to make it challenging for would-be first-time home buyers to qualify for a mortgage, leading potential buyers to continue renting for the foreseeable future.
The demand is so robust, says Urban Analytics, that it continues to see developers converting initially proposed market condominium projects to rental apartment developments in response to these market conditions.
“Calgary’s rental market has become increasingly competitive over the past few years due to a multitude of reasons,” said Kimberly Poffenroth, VP, Business Development & Market Analysts (Alberta) of Urban Analytics, during a session at the recent Calgary Real Estate Forum. “Flexibility of renting has been an attractive factor especially with the current economic stresses in Calgary. For the young professionals, it’s a lot easier to adjust and move around if you’re just committed to a one-year lease versus a 25-year mortgage and that has been drawing in people who want that ease of living in a rental building and who don’t have their employment situation figured out quite yet and who aren’t quite ready to purchase a home.”
Robert Moskovitz, Vice President, Development and Operations, Landstar Communities, told the real estate forum that cultural and economic factors currently trending will impact the rental market in the next 10 to 15 years with a major shift taking place.
“Part of it is driven by the local economy. People are less willing to look at the condo option because the option of rental gives them more – the mobility and the flexibility. The other aspect is . . . . generational in which the new generation kind of has a different perception in terms of how they look at their future and their whole understanding culturally of the shared economy so therefore it’s easier for them to come to terms with the rental product rather than purchasing something and then tying themselves to it,” he said.
Another key factor that is boosting the rental market in the city is a lack of supply. Quite simply, data indicates that on a per capita basis Calgary trails other major cities for the number of rental units it has in its inventory.
“There’s a lot of vintage and we know there’s a flight to quality here in Calgary. Calgary has the lowest inventory of rental units per 100 people across the country. For the size of the city that Calgary is they have 2.6 units per 100. If you look at similar cities across the country, Edmonton and Ottawa, they’re in the four units per 100. I look at Calgary as there’s an opportunity to build quality amenitized buildings here in the marketplace,” said Marcel Parsons, Vice President, Asset Management, GWL Realty Advisors, who was also one of the panelists during the multi-residential session at the Calgary Real Estate Forum.
These days people are choosing to rent in the Calgary market due to their life circumstances. They are at the early stages of their careers. Their personal relationships are still up in the air. They haven’t managed to save enough money for a down payment on a property. The economic uncertainty in Calgary’s future weighs on their mind.
In fact, the Conference Board of Canada in its most recent report on metropolitan economies predicted that Calgary would fall into a recession this year, which would be its third recession since oil prices collapsed in late 2014. Other recession years were in 2015 and 2016.
All these factors – economic and cultural – bode well for the rental market going forward.
And it’s a main reason why there’s a boom these days in new purpose-built rental apartment units. Urban Analytics reported at the Calgary Real Estate Forum that there are currently 52 projects, comprising 7,288 units across the city.
