Vacancy rates going down can lead to higher rental costs
Both Regina and Saskatoon renters are facing the toughest markets in nearly a decade, according to the Canada Mortgage and Housing Corporation(CMHC).
The housing agency released its annual rental market report Thursday. It showed that both of Saskatchewan's major cities' vacancy rates declined to their lowest levels since 2014.
For Saskatoon, the numbers in the report were for purpose-built rental apartments, so don't include what's happening in condos, or in apartments built out of occupied family homes. In Regina, they also cover purpose-built rental apartments and condos.
In Regina, vacancy rates for purpose-built rental units plummeted to 3.2 last year from 7 per cent in 2021— while in Saskatoon vacancy rates dipped to 3.4 per cent from 4.8 per cent.
The national vacancy rate for purpose built rentals in Canadian census metropolitan areas dropped to 1.9 per cent in 2022.
"In general you'll see an inverse relationship, so as vacancy rates are going down, prices will be going up," Nelson said.
Increased rental costs in both cities
In Saskatoon, the average rent of a two-bedroom purpose-built rental unit is $1,243— a 3.4 per cent increase from 2021. Meanwhile in Regina, rental costs jumped by 3.3 per cent to $1,186.
The monthly rent for condos is even higher in both cities.
The report showed the average rent for a two-bedroom condo in Regina rose by 14.7 per cent last year to $1,467— while the cost in Saskatoon increased by 11.4 per cent to $1,346.
These rental cost increases leave low income renters struggling to find affordable housing. In Regina, households who make less than $32,000 per year can only afford to rent eight per cent of rentals, while in Saskatoon they could only afford 7 per cent.
Anita Linares, CMHC senior analyst, said the majority of those affordable units are one-bedrooms.
"So for larger families who are in that bracket, there is a concern that they will not have adequate housing in the future," Linares said.
Linares said it's important to increase the rental supply in both cities, but also increase adequate housing options for all households in the province.
What is causing increased demand?
In 2022, Saskatoon's rental universe expanded at its fastest pace in three decades, with 801 added units, but demand is still outstripping supply, according to the report.
Nelson said economic enthusiasm in the province is driving rental demand.
"The commodity prices have been booming, investment has been picking up, that causes more people to be migrating to Saskatchewan and causes less people to leave," Nelson said. "You might even see the vacancy rate fall more in this coming year as the demand side picks up."
Nelson added that higher mortgage payments and inflation create disincentives for people considering buying homes — which also leads to increased demand in the rental market.
"I think we are starting to see in the second-half of 2022, these people who are on the fence about purchasing a home, and maybe have been in the market, are thinking maybe I'll just sit on the sidelines and kind of wait and see what happens," Nelson said.
"There has been a return to in-person activity, particularly for students and workers returning to the office," Linares said. "Some of the lowest vacancy rates were in the surrounding areas of the university and the [downtown] core."