Rent, Inflation, Real Estate
Calgary Real Estate and Rental Market Update
May 1, 2022 - Written by Jamie Palmer, President/Broker of Power Properties
Inflation Leads to Rising Rents
Anyone who has filled up their car’s gas tank or gone to the grocery store lately has seen firsthand the effect of inflation. It feels like everything is more expensive these days, it feels that way because everything is more expensive 6.7% more expensive according to recent data! Rent is no exception, rent generally follows inflation in a linear fashion. Right now rents in Calgary are increasing rapidly, normally there is about a six-month lag between increasing sales prices and increasing rents, but in the current market there hasn’t been much of a lag, and rents are continuing to rise.
As a property management company, our Property Managers are recommending rental increases to our clients at renewal time. They are well informed as to what the current market can bear in terms of increases and what your competition is. At the time of writing our NW portfolio has a 1.7% vacancy rate, our East portfolio has a 0.5% vacancy rate, and our SW portfolio has a 0% vacancy rate! Many clients are reluctant to significantly raise their rents for fear of losing their existing good tenants. For the most part, this fear is unfounded, right now when the property managers are checking to see what properties your property would be competing against, there are often zero listings in a given neighbourhood. In other words, even if your tenant wanted to move out, there are zero available homes for them to move into. This pressure is particularly acute for families with children who want to stay in the same neighbourhood in order to stay in the same school.
Increasing Your Tenant’s Rent is Critical
Other than generating additional income on your property, it is also important to raise rents so you can continue to afford to maintain them. As noted the cost of everything is rising, which includes labour and material costs for repairs, and property taxes. Failing to raise rents can cause repairs to become a disproportionate expense, making it harder for you to afford to maintain the property, which can result in the loss of the tenant you were trying to keep in the first place, and make it harder to attract new tenants. Assuming a $1500/month rent, a 6.7% increase is $100/month, so you need to increase your rent by that much just to maintain the status quo. Actual market rent increases right now are close to double that!
Housing Shortage Predicted to Remain
Not sure how long this upward trend in real estate prices and rent will continue? According to Scotiabank and other sources, the shortage of housing is effectively baked in for years to come, and will lead to continued increasing prices/rents, particularly in “affordable” cities like Calgary. This is especially true given the federal government's immigration targets (250,000 immigrants/year), as these new Canadians will need somewhere to live. There is also tremendous pressure on the federal government to increase immigration due to Canada’s aging workforce and low birthrate, which if not addressed will create severe challenges for Canada’s economy in the near future.
Never a better time to invest in Calgary Real Estate
With increasing rents, increased demand for housing, low-interest rates (even with recent increases money is cheap!), and predicted continued appreciation now is an excellent time to invest in real estate in Calgary. To learn more about how Power Properties and our property management services can help you start building your investment portfolio, click here.