Monday, September 24, 2007

What's happening to the rental market?

Of course, other than the still strongly perceived rental shortage in Edmonton and Calgary.
I keep a good look at the number of rental listings on both craigslist and
Rentboard used to have fewer than 100 listings for Edmonton just until a couple of months ago. Today, that number is over 170. Craigslist had about 40 new rental listings for Edmonton alone just today. Yes, in a single day. This does not prove anything statistically, but clearly, there's a lot of product in the market right now.
Of course, none of this should be unexpected to anyone who knows how this story played out below the 49th parallel, especially in the bubble states of Florida, Arizona etc. Based on the current Edmonton MLS inventory of over 9600 and comfree of around 3100, we have almost 13000 properties for sale. And the desperation is rising, as this 'investor' will take any offer- buy or sell. Perhaps, he or she did not really crunch any numbers before buying this property? Was this bought for cashflow purposes? for retirement? More like- "real estate always goes up and since everyone was buying, I said, what the heck?"
Add to the existing inventory of above 12 or 13k in both Edmonton and Calgary, the roughly equal number of properties that are still under construction, and what do we get? We could have the reintroduction of rental incentives and falling rents. The nouveau 'landlords' have to pay their fifth mortgage one way or the other. Something to partially offset their mortgage costs will be better than nothing.
But of course, this could all turn out wrong, and someone will clear this inventory off very quickly.
But here's the dumb question of the day: If a city in Alberta has over 20,000 properties for sale and most of them are vacant, how many new comers/migrants/immigrants does it take to clear off the inventory? And how many years will it take to do so? And will the builders stop building anything new during that time?
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