'Surge' in Hamilton home-buying takes pressure off rentals

A surge of downtown renters moving out and buying homes has helped take the pressure off Hamilton's tight rental market.

The percentage of apartment units that are available — an indication of housing affordability and market tightness — rose in 2015 compared to 2014, new numbers released by Canadian Mortgage and Housing Corporation on Wednesday show.

The vacancy rate was up to 3.4 per cent, up from a very tight 2.2 per cent in 2014.

The increased number of apartments on the market was true for all unit types except for bachelor suites, which hovered around 7 percent.

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Analysts for CMHC said even though employment was up for people aged 15 to 24 — a source of demand in the rental market — there were fewer immigrants coming to Hamilton this year, and also more people leaving rentals to buy homes.

Despite that change in supply and demand, rents still rose. The average rent for a two-bedroom apartment was up 3.8 per cent to $1,034 from 2014.

Brantford had the highest rent increases in the province: 4.1 per cent, followed by Hamilton's increase. Toronto and Guelph both rose 3.2 per cent.

The vacancy rate tightened the most (fewer units were available in 2015) in the east end, between the core and Stoney Creek. 

Renters becoming homeowners

In the centre city, there was a "surge in rental households vacating their units and moving into home ownership," according to CMHC. That showed up in an active sales market in the core: There were 29 per cent more homes sold in the centre city in the first nine months of 2015 than in 2014. 

That contributed to a 5 per cent apartment vacancy rate in the centre city. 

Consider the difference between renting and owning: The average rent for a two-bedroom unit in 2015 was slightly higher than the monthly amount a homebuyer would pay on a mortgage with a 5-per-cent down payment on the average-priced condo that sold this year.

For example: The average monthly mortgage payment for a condominium apartment in the centre city was approximately $870 in September 2015, compared to an average rent of $949 for two-bedroom units, CMHC said.

Earlier this year, the rising home sale prices had CMHC analyst Abdul Kargbo saying prices could keep renters out of the market. 

But Kargbo said Wednesday the dynamic appears to have changed.

It appears from the new numbers that relatively low interest rates, rising incomes and the fact that the cost of ownership is still close to rents is "partially offsetting the impact that we've seen from high prices."

"The balance is not too, too strong to discourage people from making the jump now," he said. 

Vacancy rates were up in buildings with more than 200 units, which the CMHC said "highlights the weakened demand for rental units in high-rise buildings."

For the first time, CMHC looked at the "secondary market" rentals, like condos and suites that are attached to houses. The vacancy rate for that kind of "secondary market" rental was very tight — 0.4 per cent. 

CMHC found that of more than 15,000 condo units in the Hamilton census area, nearly 3,300 of them, or 21.4 per cent, are rented out.