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Cautious optimism: Apartment sector showing signs of recovery but challenges still ahead
February 2011
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John Dickie, President of the
Canadian Federation of Apartment Associations (CFAA) |
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By Clare Tattersall
With Canada’s economic recovery, the apartment sector has been experiencing a rebound.
As a whole, the national multi-residential market remained stable in the first half of 2010, says a CB Richard Ellis report. However, market performance improved in various regions across the country in the third and fourth quarters. For instance, the vacancy rate in the Greater Toronto Area (GTA) dropped 40 basis points to 2.7 per cent, and the average rental rate rose 3.3 per cent since the end of 2009, to $1,051.25 per month.
“We are trending in a good direction,” says John Dickie, President of the Canadian Federation of Apartment Associations (CFAA), which represents owners and managers of more than 1 million residential rental suites through 17 member associations across Canada.
But while the GTA has experienced a drop in vacancy rates, other regions have not faired so well. According to the CB Richard Ellis report, the vacancy rate in Calgary remained stable in 2010, and rose in Vancouver, Ottawa and Edmonton, the latter of which now has the highest vacancy rate recorded in that market since 2004.
“The vacancy rate is very much specific to the city,” says Dickie. “The factors that drive the vacancy rate largely stem from the economy. Where you have job losses and people moving to owner occupied houses you’ll have an increase in the vacancy rate.”
Though the lack of stability in the national vacancy rate is disconcerting, it’s to be expected. What does concern Dickie, however, is the harmonization of sales taxes in British Columbia and Ontario on July 1, 2010.
“Both those provinces brought in the HST and they brought it in such a way that landlords have had to absorb the tax increase, which is not the case for most other businesses,” he says. “For most other businesses, they receive input tax credits and then they charge the HST on to their customers. But with rental housing, (landlords) are left holding the bag on that big cost increase.”
In addition to the HST, Dickie says he is dismayed by the two provinces’ incredibly low rent increase guidelines for 2011. In Ontario, the maximum rent increase allowed for this year is 0.7 per cent, based on the province’s Consumer Price Index (CPI) alone. This is the lowest increase in the 35-year history of rent control in Ontario. In B.C., the allowable increase is 2.3 per cent, based on a CPI of 0.3 per cent for the province plus 2 per cent.
“In British Columbia, the situation is not quite as dire but that’s still very low by (the province’s) historical standards,” says Dickie, who adds that the inadequate guideline threatens the quality of rental housing in both provinces.
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