The shifting demand in Halifax
By Ryan MacLeod
Halifax’s housing market has shown a shift to rentals since the recession, with apartments dominating new starts, and rental rates showing more subdued growth as a result. New supply of apartment units was abundant in 2011 and 2012, with new apartment unit starts well above their 10-year annual average and so far in 2013, new apartment construction has shown no signs of slowing down, as starts from January to September have already exceeded the annual average. Meanwhile, new starts of single-detached units have been much tamer, with starts below the 10-year annual average each year since the 2009 recession.
Why the shift? It appears that the shift in new supply from single-detached housing to rental apartments is demand-driven. CMHC has noted that the recent shift in demand is due to multiple factors. Positive net-migration to the city provides a boost in apartment demand, as new migrants tend to be apartment renters. The aging population also provides a boost to apartment demand, as some recent empty-nesters choose to downsize and are drawn to the low-maintenance, single-floor living offered by apartments. Finally, stunted full-time employment growth in the years since the recession has at least temporarily limited the ability of some would-be home owners to purchase their first home, while comparatively strong growth in part-time employment tends to support rental markets.
Despite growing demand for apartment rentals, strong supply growth has increased vacancy rates in recent years. In 2012, the apartment vacancy rate in Halifax was 3.0%, above the average of 2.6% reported by CMHC for 35 census metropolitan areas across the country. While the average vacancy rate is forecast to remain steady in 2013 and 2014, it is forecast to grow in Halifax.
What does this mean for affordability? A higher vacancy rate is actually a good thing for rental affordability, as excess supply in the market helps to relieve some of the upward pressure on rent caused by increased demand. While average rents are forecast to continue to grow over the next two years, the rate of growth has slowed since 2011 and is expected to continue to do so.
Increased apartment vacancies in Halifax have come at a good time. With major project activity expected to continue growing in the coming years, related employment growth should continue to support migration to Halifax, and as the average age of the population continues to climb, the tastes of retired empty-nesters will likely continue to shift to apartment-style living. Current growth in apartment supply should leave the city’s rental market well-positioned to absorb increased demand in the future without putting too much upward pressure on rents.
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Ryan joined the Partnership in September 2013, as an Economist and Project Development Specialist. In his role, Ryan is responsible for conducting research and delivering measurable results in support of the organization’s business plans and the Economic Strategy. This includes leading the development of the Halifax Index, as well as producing project proposals and reports, monitoring economic trends in Halifax, and responding to investor information requests.