Real Estate 38 Views

Rising rents and cutthroat competition: Inside Ottawa's booming rental market

In late 2017, local realtor Steve Peippo started noticing something exceptional was going on in Ottawa’s residential rental market.

Prospective tenants competing for rental properties were offering more than the listed price, or offering longer rental terms — anything to gain an advantage.

Only a few months prior, a federal government report found that Ottawa landlords were raising rents in response to tight rental market conditions.

Peippo had a front row seat to the shifting market. He said he would contact landlords to offer his real estate services, only to be told they were doing just fine, thank you, having received more than 100 viewing requests in a matter of days after listing a rental property on Kijiji.

“It’s almost more challenging to find a rental than it is to find a purchase. And I’ve seen people get quite desperate,” Peippo said.

His experience isn’t isolated — an amalgamation of data compiled by this newspaper suggests Ottawa’s residential rental market has recently become red-hot, with demand and prices ballooning and vacancies increasingly scarce.

Because recent statistics on the local rental market are piecemeal — with different stakeholders and authorities assessing swaths of the market at varying standards of rigour — this newspaper gathered and compared numbers from multiple sources.

Taken together, the data suggest that in 2018, a rental market that was once tight has become suffocating.

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Peippo, a sales representative with Ottawa boutique real estate brokerage Blue Panda Realty, works with a handful of rental clients on a monthly basis.

After observing surging rental-asking prices and cutthroat competition for units, he decided to undertake some ad hoc quantitative analysis to see if this trend had empirical backing.

After pulling all MLS listings for two-bedroom, one-parking spot residential rentals in Ottawa for May in 2017 and 2018, he found the average rental “sold” price jumped 14 per cent, from $1,739 to $2,018.

Year-over-year rent increases for the same category of listing jumped only five per cent from 2015 to 2016, and two per cent from 2016 to 2017.

The sample sizes he was working from were quite small — fewer than 100 properties in each — and units listed on MLS tend toward the higher-price end of the rental spectrum, according to Peippo, so this newspaper reached out to some larger players on the real estate scene.

The voice of authority on the subject of rental market data across the country is the Canada Mortgage and Housing Corporation’s Rental Market Report, published every fall. Unfortunately, that means its 2018 numbers won’t be available for a few months yet.

In its 2017 report, CMHC found a vacancy rate of 1.7 per cent for rental apartments in Ottawa, down from three per cent in 2016 and the tightest in six years. The average rent for a two-bedroom apartment was $1,232, up from $1,200 the previous year.

Among two-bedroom rental townhouses and condos, of which there are far fewer than rental apartments, the average two-bedroom rents in 2017 were $1,209 and $1,566, respectively.

“In general, tighter rental market conditions this year encouraged landlords to increase rents,” the report found. CMHC captures rents charged for vacant, available and occupied units, and the latter are protected by annual rental increase rules.

Rental listing websites, on the other hand, only capture units on the open market — an occasion where landlords can adjust rents to reflect the demands of the market.

Crystal Chen, spokeswoman for rental search engine PadMapper, explained that their numbers are intended to help prospective tenants answer a pressing question: “If you were to move out tomorrow, what would you see?”

According to PadMapper, the median price of a two-bedroom rental in Ottawa in June 2018 was $1,500 monthly, up 15 per cent from the year before and three per cent from May.

The reason there’s a difference in prices between CMHC and a rental listing website like PadMapper, is that CMHC’s average rent calculation is influenced by the large number of units in its survey that are subject to rent control — a provincial policy that (mostly) prevents landlords of private rental units from drastically increasing a tenant’s rent year over year.

In Ottawa-Gatineau, online classified behemoth Kijiji Canada found that the average rental price — drawn from room, apartment and condo, and house rental listings — jumped seven per cent between June 2017 and June 2018, compared to a prior year-over-year increase of three per cent.

In the same period, the number of Ottawa-Gatineau rental “wanted” ads on Kijiji increased by 17 per cent — a significant turnaround from a previous year-over-year decline.

“We do see activity on Kijiji as a barometer for what’s happening in the Canadian real estate industry,” said Greg Abramowitz, head of real estate and jobs at Kijiji Canada.

“There’s quite a lot being said in those numbers about the market in general and the competitive nature of it.”