Most urban centres registered lower vacancy rates. The lowest vacancy rates were in southern Ontario while the highest vacancy rates were in south western Ontario major centres. Rental vacancy rates remained stable in the GTA and in eastern Ontario urban centres.
A number of factors exerted downward pressure on vacancy rates. A gradual US economic recovery coupled with continued concerns about the debt crisis in Europe generated uncertainty in financial markets. Renter households tend to be more sensitive to uncertainty in the marketplace. Consequently, renter households considering the jump to more expensive ownership housing may have postponed this decision.
A second factor supporting rental demand was the rising cost of ownership housing. First time buyers are most sensitive to the changing costs of home ownership. Many prospective renter households took advantage of lower prices and low interest rates during the early part the recovery and bought for the first time in an attempt to beat rising mortgage carrying costs. Stronger growth in home prices since last spring increased the relative cost of owning versus renting. More sales at higher price ranges in some major Ontario centres was evidence that the market was driven by repeat buyers.
A third factor exerting upward pressure on rental demand was employment trends for young residents aged 25-34. This group comprises the echo boom cohort or the children of the young baby boomers born in the early 1960s. The echo boom was the last spike in birth rates (1980 – 1995) following the baby boom era. For most of the past decade, young adults have been living home longer. Few job opportunities delayed household formation and their departure from the family home. Economic circumstances have improved for this group in recent years. Not only are there more of these households but also a growing pool of echo boomers were able to land more jobs and were more likely to move into rental accommodation – exerting downward pressure on vacancy rates.
Factors exerting upward pressure on vacancy rates
Other factors were less supportive of rental demand. Recent Ontario migratory patterns is one good example. Net migration into Ontario has slowed sharply since 2010. This was largely due to lower international immigration and, to a lesser extent, to migratory outflows to other provinces. Ontario continues to lose migrants to other provinces as Ontario`s job prospects have not kept pace with job openings in the rest of Canada. Most immigrants tend to rent upon immediate arrival into Ontario.
On the supply side, higher condominium and conventional rental completions created competition for existing rental accommodation. Some projects not geared to end users have been reaching the completion stage over the past year. In addition, more conventional rental completions, particularly in markets such as Windsor, London and Greater Sudbury meant more competition to retain and attract tenants - exerting upward pressure on vacancies.
On net, demand pressures were strong enough since April 2011 to offset increasing headwinds from new supply – resulting in lower vacancy rates across most major Ontario markets.
Apartment rents for 2-bedroom units that were common to both 2011 and 2012 spring surveys rose by 2.1% This rate of increase in rents was slightly higher than the increase registered in the spring of 2011 but in
line with the general rate of inflation.
Units that experience turnover in Ontario are not subject to rent controls. Lower Ontario vacancy rates over the past year alongside more units turning over supported stronger rent increases in the spring of 2012.
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