Ontario Government Looking for Feedback on Boosting Apartment Rental Supply.
One of Canada's Largest Landlords Reports 17 Per cent Rent Increases on Vacated UnitsCanadian Apartment Properties, one of the largest landlords in the country, said the booming housing market in Ontario is helping to lift rents as consumers are driven out of home ownership because of affordability.
The Toronto-based real estate investment trust held a conference call to discuss second-quarter results, which were boosted by a 17 per cent increase in rates for suites vacated in the Ontario market.
"Clearly the [Greater Toronto Area] is the strongest," Mark Kenney, chief operating officer of CAP REIT told Bay St. analysts on the call. "But we are seeing very strong increases in the submarkets as well. I think it's a housing supply issue that is winding its way throughout all of Ontario to be perfectly honest. The GTA is clearly leading the way."
The Toronto Real Estate Board reported this month that on a seasonally adjusted basis, prices in the region moved up for a third straight month in July after almost a year slowdown driven by provincial measures to cool off the housing market. The average price of a home in the GTA reached $782,129 in July.
Canada Mortgage and Housing Corp., the Crown corporation that advises the federal government on housing policy among its many functions, said the GTA apartment vacancy rate had dropped to 1.1 per cent in the fall of 2017. That was down from 1.3 per cent a year earlier.
Across the province, CMHC reports a tightening rental market with vacancies at 1.6 per cent based on its last report, which is down from 2.1 per cent a year earlier.
The REIT said that for the period ending June 30, the average monthly rent in its portfolio was $1,289 in Ontario, and occupancy stood at 99.5 per cent. Overall, rents climbed 4.8 per cent during the period. For suite turnovers, rents were up 10.5 per cent, or $123, across the portfolio, with Ontario helping to drive the gains.
CAP REIT has interests in 50,862 residential units, comprising 44,270 residential suites and 32 manufactured home communities containing 6,592 land lease sites across Canada and the Netherlands.
The REIT said it had identified more than 80 potential redevelopment and intensification opportunities across the country -- mostly in Ontario and British Columbia. Canadian Apartment Properties said that should net 10,000 new apartments, most of which will come by way of infill on vacant land it owns.
In Ontario, where the REIT has more than 22,000 suites, the provincial government tightened rent control rules to include buildings constructed after 1991. Rent increases across the province can now only be increased by a prescribed rate based on inflation and are capped at 2.5 per cent.
However, in June, the province elected a Conservative government that some landlords are hoping will ease rules for multifamily owners.
"This government appears to be very serious about addressing the supply issue and encouraging rental investment in the province. There has been some open discussion, and they are looking for feedback," said Kenney, adding he wasn’t suggesting any changes for at least a few months. "We are certainly more optimistic than we were three months ago."
Officials on the call said suite turnover in Ontario will soon result in 20 per cent increases in rents, resulting in downward pressure on the percentage of tenants vacating. Rent control rules in Ontario allow the landlord to reset rent but only when a tenant moves out, leading to more tenants staying put in a unit because they are protected by rent control.