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Posted in CMHC, Rental Rates, Vacancy Rates

The considerable tightening of Saskatoon’s rental market as recently described by Canada Mortgage and Housing Corp. (CMHC) came as no surprise.

After the madness of COVID and the connected hot housing market, in which people bought almost everything in sight, something was going to happen. One of those things was inflation, giving rise to higher mortgage rates. Another was a dearth of properties to buy, most notably affordable single-family homes.

Both of these somethings would be enough to support more renting. But there is much more going on.

According to CMHC, Saskatoon is experiencing the tightest rental market since 2014 — in which year, you may recall, commodities slumped and remained low for some time.

The vacancy rate for purpose-built rental units fell to 3.4 per cent in 2022. That rate may have been 10 per cent or possibly higher for a time, although it has come down gradually over the last few years.

Predictably, rents also rose, by 3.4 per cent to $1,243 from $1,183 for the average two-bedroom.

The condo market’s vacancy rate was 3.7 per cent, with the average two-bedroom going for $1,346, up from $1,208 in 2021.

Meanwhile, builders added 801 rental units to the market “universe,” the biggest expansion in three decades and 40 per cent more than in 2021. Even that wasn’t enough to accommodate rising demand.

That’s due, as always, to the economy (good and bad), but also to immigration.

CMHC points to employment, first of all, which was up considerably. The unemployment rate for youngsters (aged 15 to 24, those more likely to rent) dropped more than 20 per cent.

Secondly, while Saskatchewan keeps losing people in the interprovincial migration battle, we’re up on international migration. Indeed, CMHC says the influx of immigrants last year led to record-high net migration gains.

And then we had the agricultural commodity boom. Along with record-high prices for grains and oilseeds, potash boomed last year, as CMHC pointed out. I would add that uranium has also bounced back — strongly — and Saskatoon has also seen new ventures pop up, such as the Vital Metals rare earths processing plant.

In these parts, commodity prices drive a strong economy and often lead to immigration gains. So it is, and so it always has been.

While all of these points are positive indications for the economy — and therefore for most of us — affordability is a serious problem for low-income people. CMHC noted that those in the lowest-income bracket could only afford seven per cent of properties in the rental universe, and many of those would be bachelor or one-bedroom apartments — not suitable for families. It is clear that more supported housing is necessary.

For those in more stable income brackets, renting will continue to be a popular option. Even if there were enough homes for sale in Saskatoon, we remain in a high-interest-rate environment and some folks cannot qualify for mortgages at this time. Let’s hope that begins to change soon, since the Bank of Canada is signalling that increases to its benchmark rate will ease or stop.

Furthermore, renting is, perhaps obviously, less expensive. Homeowners have additional costs such as property taxes, building maintenance, and higher utility bills.

A recent study by Point2Homes showed that shelter costs in Saskatoon averaged $1,528 for homeowners, as compared to $1,210 for renters — a difference of $318 or 26.28 per cent.

It’s important to note that market conditions change, sometimes with considerable speed, and statistical reports are always in the rearview mirror by the time we see them.

They are, however, benchmarks and snapshots of conditions that help us track where we have been and point to where we are, or should be, going.

Which brings me to the forecast. CMHC said that although the supply-demand rental gap did narrow a bit last year (800 additional units were built, after all), it may widen again. That’s because higher interest rates are curtailing home building while migration and employment continue to show strength for 2023. Ergo, more people, fewer homes to choose from.

However, in its Prairies Housing Outlook note published Jan. 30, TD Bank’s tone was similar to CMHC’s while commenting on the strength of the housing market.

“Moving forward, the same factors that have been helping to prop up markets in the Prairies over the past year are likely to remain in place,” the bank said, while forecasting GDP growth of 1.7 per cent.

That would be the second best among Canadian provinces, after Alberta’s 1.9 per cent.

Therefore, existing housing sales will likely see a bounce by the second half of the year; but it seems unlikely that the pressure on renters will ease anytime soon, just the same.


Story by: Saskatoon Star Phoenix