Understanding rental rates, vacancy rates and turnover rates is an integral part of estimating the ROI (return on investment) on a rental property. Earlier this month, CMHC released the latest provincial averages based on Centris data. Although rental market statistics can vary widely from neighbourhood to neighbourhood, these figures provide a cursory overview of the average rates you can expect on a rental investment in Montreal.
In 2017, Vacancy Rate Decreased by 1% at the Provincial Level
According to a Rental Market Survey conducted by the Canada Mortgage and Housing Corporation (CMHC), 3.4% of properties in Quebec were vacant in October 2017. This amounts to a 1% decrease compared to October 2016. The strength of the labour market and immigration compensated for the increase in supply caused by rising rental construction in the province.
In Montreal, vacancy rates of rental condominiums dropped from 3.1% in 2016 to 1.8% in 2017.
Vacancy rates per bedroom number:
- Bachelors: 3.7%
- 1 bedroom: 3.3%
- 2 bedrooms: 2.5%
- 3 bedrooms:2.4%
Average Rental Rates Remain Stable
The average rent for a two-bedroom apartment in the province of Quebec remained at $751. Among the CMAs, the rate was at its highest in the Québec CMA ($820).
Specifically in Montreal, the following averages were reported for October 2017:
- Bachelor condos: $958 (decrease from $1121 in October 2016)
- 1 bedroom condos: $989 (increase from $944 in October 2016)
- 2 bedroom condo: $1,180 (increase from $1158 in October 2016)
- 3 bedroom condo: $1,542 (increase from $1,366 in October 2016)
- Overall condo average: $1,181 (increase from $1,174 in October 2016)
No Change in the Turnover Rate
Turnover rate is the share of units that changed tenants in the last 12 months. Turnover rates are influenced by many factors including economic conditions, renter profiles and building features.
- In Quebec, the 2017 rate remained consistent at 18.6%
- In Montreal, the rate was estimated at 17.3%.
Turnover rate per bedroom number in Montreal:
- Bachelor condos: $25.1 (increase from $23 in October 2016)
- 1 bedroom condos: 17.6% (decrease from 18.7% in October 2016)
- 2 bedroom condo: (16.4% increase from 15.5% in October 2016)
- 3 bedroom condo: 14% (decrease from 17% in October 2016)
Analysis of the results by apartment size shows that a higher recorded turnover rate for bachelor units (25.3%).
Immigration and the Labour Market Stimulated Demand
The strength of the labour market and immigration has balanced out the increase in supply this year. According to Statistics Canada, the labour force grew significantly in the lead up to the survey, specifically by 2.2% between November 2016 and October 2017 (compared to 0.7% the previous year). Net migration also jumped by 21% in that same period. Another factor which is likely to have influenced demand is the acceleration of households aged 75 and over. According to industry reports, this age often marks a change in occupancy type.
Condominiums Remains a Strong Property Type for Rentals
All three CMAs in Quebec reported an increased number of rental condominiums. The share increased in Montréal from 15.7% in 2016 to 17.0% in 2017.
The new mortgage regulations imposed in 2018, including a stricter stress test for all mortgage borrowers, is likely to contribute to a healthy rental market over the coming year. When combined with escalating housing prices, the stress test is likely to slows down homeownership rates, keeping more Canadians in rented accommodations.