Rents are no longer skyrocketing but vacancy rates are low and there’s still an affordable housing shortage. When the pandemic ends, all bets are offS
ome Halifax landlords are offering a month or two of free rent, move-in-early deals, $500 Visa gift cards, free parking, and other incentives to woo tenants—a sign to some experts that the city’s tight rental market is loosening up.
New figures from Padmapper support the notion. In December, Halifax slipped three spots to 14th on the apartment rental site’s national ranking of priciest cities. One-bedroom rents have fallen 5.2% from November to $1,270 and two-bedrooms are down 2.8% to $1,740.
“The monthly decline of over 5% in one-bedrooms is significant,” says Padmapper data analyst Crystal Chen, who gave Halifax Magazine an early peek at the numbers to be released later this week. “It seems to go hand in hand with [the] inkling that the Halifax market has softened a bit.”
Rents are still higher than a year ago, up 5.8% for one bedrooms and a whopping 19.2% for two bedrooms, a jump that far exceeds Canada’s 0.62 inflation rate for 2020. Since Padmapper started publishing Halifax’s market data in 2017, one-bedroom apartment rents have increased by 43%.
Padmapper’s figures reflect apartments available to rent at a particular time. That snapshot—a relatively small sample for Halifax—makes the numbers less comprehensive and reflective of market conditions than the Canadian Mortgage and Housing Corporation’s rental market research report, which is set to come out in late January.
CMHC senior market analyst Chris Janes won’t comment in advance of the report’s release won anecdotal indications the market is tipping, at least a little, to favour renters. “As you will see, the Halifax market has gone through an interesting year as have all large Canadian rental markets,” he says.
Kevin Russell, executive director of the Investment Property Owners Association of Nova Scotia, started noticing the rental market slowing a few months ago.
He expects that to show up in CMHC’s rate of apartment vacancies, which a year ago got tighter than Toronto, Vancouver, and Montreal, with less than 1% of apartments available to rent, compared to 1.6% in the previous year.
“I expect there will be an extra point or two on the vacancy rate,” says Russell. “It certainly won’t be showing 1%.”
The Alexander, the 240-unit high rise that Halifax residential rental giant Killam Apartment REIT built next to the historic Brewery Market, is offering $99 for the first month and a $500 Visa gift card.
The Junction, an upscale 12-storey apartment building near the Hydrostone, has a two-month free special for tenants who move in by Feb. 1. In the South End, the made-over Fenwick Tower (now officially “The Vuze”), is trying to woo new tenants with a month of free rent.
The Alexander’s cheapest one-bedroom available is $1,570 for a month. The Junction’s one bedrooms start at $1,525. The Vuze has one for $1,725.
It’s not only landlords with new buildings who are grappling with changing market dynamics.
“The market is very, very slow right now,” says a man using Kijiji to try and rent a large two-bedroom flat off Quinpool Road near Oxford for $1,200 a month. He declined to elaborate or disclose his name, saying, “I have calls I need to take.”
Neil Lovitt, vice-president of planning and economic Intelligence with real-estate consulting firm Turner Drake & Partners Ltd., says free rent incentives are typically a last resort for landlords.
“Usually if you operate a rental building you have incentives that are less directly impactful on your bottom line,” he says. “A month free can set up a bit of a negotiating play for existing tenants, whereas if you offer a free iPad, they might not ask for that.”
Lovitt says incentives don’t appear to be widespread.
The last time such freebies appeared was back in 2014 and 2015 when the development of the new Larry Uteck neighbourhood in Bedford led to a jump in apartment availability. Then, vacancy rates were between 3% and 5%, a range deemed balanced for both renters and apartment owners.
What’s happened since to ratchet the rate down to under 1% is a surge in the number of immigrants moving to the city, people migrating from other provinces, and empty nesters selling their homes and downsizing to apartments.
Ten months of a COVID-19 pandemic is helping boost apartment availability and curb potential rental price hikes because immigration has dropped and many deep-pocketed international students are staying home, just as a number of new apartment units are becoming available to rent.
The pandemic also is curbing demand for short-term rentals, which is leading some of those landlords to shift their properties to long-term rentals.
Lovitt says he’s not seeing anything to indicate a dramatic shift that would bring the market into balance.
He says Padmapper’s rent decline could be caused by the province’s move late last year to impose a temporary 2% cap on rent increases and ban so-called renovictions, where tenants are evicted so landlords can jack up rents by renovating.
He says Halifax is typically 11th to 15th on the list of the country’s priciest rental markets.
An estimated 4,800 new units are forecast to be available over the next 20 months. Once the pandemic passes, renewed immigration, the return of international students, and the growing appeal of condo-style apartments will fill up the new stock. “Without COVID and new product, we might see a higher vacancy of about 1.5% to 1.8%,” says Russell. “It still would be a tight market. There has to be an increase in supply.”
The scarcity of homes to buy after a many-month buying frenzy in Halifax is likely to support higher rents because tenants will have limited options to shift to home ownership.
Rental market experts say a plateau in rents or increase in vacancies won’t do anything to alleviate the shortage of affordable housing.
“That’s a whole different issue that needs to be addressed,” says Russell. “People living on fixed incomes whose income hasn’t come kept up with inflation are falling further behind.”
He says the high cost of developing on the peninsula, including land, taxes, and associated fees, make building affordable housing without government support impossible.
“That’s why rents are where they are,” he says.