Construction of purpose-built rental apartments in Nanaimo is happening at a pace that hasn’t been seen in decades, and just when the community seems to need it most.
Housing data released by the Canada Mortgage and Housing Corporation on Friday shows 138 apartment unit starts in Nanaimo during the first two months of 2019, a 710 per cent increase from last year when there were just 17 during the same time period.
Braden Batch, senior economics analyst with Housing Markets Insights West, said the number is significant for Nanaimo, and most of those units are purpose-built rentals.
“The big story is that there is an elevated number in apartment starts,” he said. “It’s not hard to see it being elevated because it was essentially zero for 30 to 40 years. I am not even joking.
“It is not just Nanaimo, purpose-built rental was not built since the late 1970s in most of the country. We don’t know why that is and we’re still trying to figure that out.”
The vacancy rate for purpose-built apartment buildings in Nanaimo is around 2.5 per cent.
Batch said while he expects an overall slowdown in B.C. construction starts due to a decline in population growth, apartment starts and purpose-built rental units in Nanaimo are expected to continue at a high pace.
There were 41 apartment unit starts in Nanaimo last month alone according to CMHC data, which only counts purpose-built apartments. Rental units in secondary suites or other types of housing are not calculated.
Batch said it is a “little bit difficult” to figure out what is going on with the rental market in Nanaimo but low vacancy rates and high single-family home prices, are likely factors for the increase in apartment starts.
“The transition right into a single-detached house is quite a leap for a lot of people at this point in time,” he said. “That has two effects, either you have people who are staying in apartments longer which adds more to rental demand which is what you see reflected in the apartment starts. The other effect would be the condos because it would become a more affordable entry point for the first time home-buyer.”
Single-family dwelling starts kept pace with last year, with 49 starts during the first two months of 2019. There were 48 starts in the first two months of 2018 according to CMHC.
Nationwide, the annual pace of overall housing starts in Canada continued its descent. The monthly seasonally adjusted annual rate of housing starts in February was 173,153 units, a 16 per cent decrease from January, according to the CMHC.
Batch said it is unclear what impact recent mortgage rule changes for first-time homebuyers has had on the rental market in Nanaimo. It is also hard determine whether the increase in apartment starts will lead to lower rental rates because a portion of the rental market includes home and condo owners renting out units as well.
“You have to look at the supply as a whole rather than this one smaller area,” he said. “The new apartment starts, what they do more than anything else is they prevent further rent increases on the units that already exist. That might not be something that claws back the increase in rent right away, but it does kind of prevent the ability of landlords in the area from raise rents in their units because now they have competition.”
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