State of the Union – Calgary Rental Properties

Calgary’s rental and investment property market is one of low vacancy and prices that, compared with other cities in Canada, are higher than average. Yet, one thing that many renters may not believe is that Calgary’s, and to a larger extent Alberta’s, rental prices are in line with average prices for consumer goods and the upwards trend in median incomes per family.

Why is it important that these three seemingly separate factors are considered side by side? Simply put, Alberta’s rental prices are not out of line with the ability for those seeking vacancies to afford them. In fact, in relation to consumer goods prices, rent does not fluctuate nearly as much year to year, let alone month to month, mostly due to leases and lease terms that do not allow for increases outside of a certain percentage, or at all. Compare that to the price month to month of a pound of oranges at the local supermarket, which rises drastically in winter months, and fluctuates during summer months depending on the ability of supply to meet demand.

That very same rule of supply and demand is currently what drives the market in Calgary. For the average renter, there is fierce competition for available space, as vacancies in Calgary are still near the 1% mark. Yet, those same prospective renters are discerning and budget conscious. What this translates to for landlords and property owners is that while one may have a well located, inner city suite, with tasteful furnishings, the rental cost must stay in line with expectations.

Landlords and property owners can also expect their own fierce competition, as having a long term lease holder for your property is the most ideal income generating prospect. Calgarians are not adverse to staying put when the value provided, in location, furnishings, ease of access, and the like, outweighs the perceived value of moving to another rental property. Providing that value is paramount, a fact that most Calgary property owners and managers realize, as evidenced by the large amount of long term rental agreements (those 12 months or longer) being signed in Calgary in 2014.

This is a change from earlier in the decade, when there was a significant downwards trend in rental leases signed or properties purchased with the intent of investment, mostly due to the 2009-2010 economic recession. Coming out of the recession, the average renter was wary due to the instability of the economy, and was waiting to see what the long term consumer goods and income trends would be, while the investment property buyer was waiting for the economy to stabilize before “buying in.”

 

In sum, Calgary is currently in a state of saturation, as there is a good balance between rental price, consumer goods, and median incomes. Renters are depending on the stability and low fluctuations of rental prices, while landlords are working to keep long term tenants. As well, after the recession, once the economy stabilized, the surge in rental properties available attracted many workers to migrate to the city, along with the upwards trend in incomes generated in the city over the past half decade (3-5% or better, year to year). As long as the economy stays stable, and new rental properties emerge in line with new workers at affordable market prices, Calgary can expect to remain a diverse, desirable place to live and work.

– Authored by Warren Phipps, Managing Owner at Mountain Park Real Estate