There were 19 new purpose-built rental apartment projects that launched in Calgary in 2019, which brought 2,602 new units to the market, according to a report by real estate research firm Urban Analytics.
In contrast, there were just six projects with 543 new units launched throughout 2018.
“This increased supply resulted in the city experiencing greater variance in occupancy rates in each quarter of the past year,” said the report. “Despite the additional new supply, occupancy rates remained quite high over the first three quarters of the year. However, the release of seven new purpose-built rental buildings with an aggregate total of 799 additional units being added to the market during the last quarter of 2019 caused a spike in vacancy rates and a corresponding drop in the occupancy rate to 85 per cent.
“Despite the increase in vacancy, the average rental rates remained stable compared to the previous quarter at $1.97 per square foot. UA anticipates prevailing demand for quality new rental product will steadily absorb much of this new supply during the initial quarters of 2020.”
The company said the B20 mortgage stress test rules continue to make it challenging for would-be first-time home buyers to qualify for a mortgage, leading potential buyers to remain in the rental market. In addition to the challenges brought on by the B20 mortgage stress test, many Calgarians are choosing to rent as opposed to buying due to the more desirable product many of these new purpose-built rental projects are offering, added the report.
“The ability to have flexibility with signing onto a one-year lease as opposed to a 25-year mortgage has also appealed to local renters given the uncertainty caused by prevailing economic challenges and headlines of decreasing home prices. As a result, UA continues to see developers converting initially proposed market condominium projects to rental apartment developments in response to these market conditions. UA anticipates modest increases in achievable rents and lower vacancy rates during the next few quarters as new supply (existing and nearing completion) is steadily absorbed.”
UA said it is monitoring 61 newer purpose-built rental apartment projects comprising 8,282 units across four major Calgary sub-markets on a quarterly basis. There are approximately 65 new purpose-built rental projects with an aggregate total of 19,225 apartment units proceeding through the planning and construction process in Calgary. Of these projects, there are approximately 16 concrete and nine wood frame purpose-built rental projects currently under construction, which comprise 6,049 units and 826 units respectively, it said.
Mario Toneguzzi is a business reporter in Calgary.
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