Although Estevan still leads provincially in the average price of rent for two-bedroom apartments, it is no exception to the trend of downward pressure on the price of rent, and increasing number of rental unit vacancies in Saskatchewan.
According to the Fall 2015 Canada Mortgage and Housing Corporation’s (CMHC) Rental Market Report, the average monthly rent for a two-bedroom apartment in Estevan was $1,209, while the overall average monthly rent for a two-bedroom apartment in Saskatchewan’s urban areas was $1,056.
While the average rent for a two-bedroom unit in Saskatchewan’s urban centers has remained stable, Estevan and Lloydminster have seen more significant drops in the price of rent.
According to the CMHC report, the Energy City has seen, on average, a year-over-year decrease of 16 per cent to the average cost of rent for a two-bedroom unit. Lloydminster has seen a more moderate 7.1 per cent decrease.
“What’s happening economically in those areas is a loss of jobs. Not only in drilling activities, but in servicing, and other peripheral sectors,” said Goodson Mwale, a senior market analyst for Saskatchewan with the CMHC.
The average apartment vacancy rate in Saskatchewan’s urban centres increased from 4.1 per cent to 6.8 per cent, from October 2014 to October 2015, according to the fall 2015 report.
Estevan, and other census agglomeration areas have all seen much more dramatic increases in rental unit vacancies. The average apartment vacancy rate in Estevan spiked from 12.5 per cent in 2014, to a whopping 20.8 per cent in 2015.
Mwale said a number of factors influence the dropping rent and rising vacancies in Saskatchewan, including reduced renter demand, particularly in areas most exposed to activity in the oil and gas sector, and the economic consequences of being in such proximity to the industry.
“The decline in the energy sector has impacted people’s ability to rent in those markets,” said Mwale. “There is a loss of jobs and we’re seeing unemployment rates increase in those areas too. When people are out of work it impacts their ability to rent in those places. That has impacted renter demand.”
Mwale noted another factor that plays a role in lowering rent, and ratcheting up vacancies is supply, which hitherto, has been on the rise all throughout the province. A total of 1,280 purpose-built rental apartment units were built across the province between July 2014 and June 2015, which was on the heels of the completion of 1,368 rental apartment units in the previous year.
Discouraged by weak economic conditions, the number of migrants, both international and from other parts of Canada, have decreased, lowering the demand for apartments and housing even further.
By mid 2015, the CMHC report indicated net migration into Saskatchewan decreased by 68 per cent, from 5,292 migrants in the fall of 2014 to 1,673 in the fall of 2015.
Mwale said Estevan has also seen such a dramatic change in vacancy rates because of the size of the renter universe that exists within the city, compared to larger centres like Regina or Saskatoon.
“The number of people there to rent apartments that are available to be rented out is the renter universe. In Estevan, it’s not very large,” said Mwale, who noted that Estevan has a comparatively smaller renter universe than cities like Regina or Saskatoon. “Changes are proportionally magnified in the vacancy rates when you’ve got fewer apartments being rented.”
For changes to occur in the rental market, Mwale noted that a few things would need to occur, the first being an increase in economic activity and growth within local economies, particularly in communities like Estevan, which are harder hit by the declining price of oil.
“Employment expansion needs to pick up pace. That would increase renter demand and also the number of people coming from various places, looking for work,” said Mwale. “It’s a question of when that happens. We’re probably not going to see an immediate return to the levels we’ve seen in the past.”