With London’s apartment rental market reporting both loosening vacancy and pricing gains, the one mid-pandemic certainty is uncertainty
WHILE RENTERS IN London had a little more to choose from last year, the city’s apartment rental market continued to see rising rates and a relative low turnover, according to a new report from the Canada Mortgage and Housing Corporation (CMHC).
The CMHC Rental Market Survey reports on market conditions in major Canadian centres between October 2019 and October 2020.
While London’s vacancy rate nearly doubled during the period — from 1.8 per cent to 3.4 per cent — it’s not yet high enough to put a dent in rental rates, says Anthony Passarelli, senior analyst with the CMHC.
“In London, even though you’re in the mid-three-per-cent range, that’s not historically a very high vacancy,” he says. “At three per cent, there’s still issues with finding a unit, with few options for renters.”
A chunk of the vacancy gain came from new purpose-built rentals, the CMHC says, with a net total of 746 new primary rental units coming onto the market in London last year. With the pandemic curtailing both immigration and the incoming student population, those new units pushed the vacancy rate up. “The estimated number of occupied units in our survey was stable compared to the previous year,” the report found. “The rate of supply growth exceeded stagnant demand for rental accommodations.”
Meanwhile, increases to rent prices accelerated, with the average rent for a two-bedroom apartment (excluding condo apartment rentals) increasing in London by 6.8 per cent ― from $1,107 to $1,207 ― compared to 4.9 per cent a year earlier. The average rent for a condo apartment unit jumped from $1,455 to $1,619.
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The CMHC cautions, however, that some of this reflects pre-pandemic data: “This acceleration in rent growth in part reflects the greater competition for units in the time preceding the pandemic, when vacancy rates were near record lows,” the report reads.
“With rent growth being strong, it’s definitely a challenge to affordability,” Passarelli says. “The rent growth is something that, if you talk to people that deal with the lower end of the market, is a concern. Rent growth trickles down to the less expensive units and it makes it harder for some of that movement, which you need.”
In addition, while the overall vacancy rate has increased, it hasn’t increased for all segments of the market. At the lower end of the income spectrum, the vacancy rate stayed quite low in London, at 1.6 per cent.
Looking ahead, whether these pressures on the rental market are alleviated or exacerbated depends, like a lot of things, on global trends related to Covid-19, Passarelli says. Among them, rates of immigration and the return of in-person post-secondary schooling loom largest ―and will be the biggest determinants of where the market goes from here.
“There’s a lot of wildcards to be considered this year,” he says. “A lot of it is up in the air.” Kieran Delamont