While demand for rental dwellings increased, the supply of rentals remained constricted
New York, NY (PRWEB) January 24, 2014
Over the past five years, the Apartment Rentals industry has moderately grown alongside rising demand and a constricted supply of rental dwellings. Industry players rent out housing units ranging from entire houses to apartments in multi-family buildings. In the five years to 2014, a declining, but relatively high unemployment rate restricted consumer's income levels, which, when combined with rising home prices, forced many to rent instead of buying a home. Furthermore, despite stricter immigrations standards, a positive stream of migrants pushed up demand for rental because migrants' typically lower incomes forces them into the rental market.
However, while demand for rental dwellings increased, the supply of rentals remained constricted. Since homes, especially condos, compete with purpose built rental buildings for the same real estate and development resources, the past decade's increase in homeownership and condo construction greatly increased rental dwelling's development costs. Consequently, the number of rental units nearly stagnated, with a large portion of supply driven by rented out condos. As such, when relatively high unemployment, inflated home prices and increased migration increased demand for rentals, the restricted supply caused the rental vacancy rate to decline from 2009 to 2014. This, in turn, allowed landlords to increase rents, pushing up industry revenue and profitability, which climbed within the same period. However, loose mortgage lending standards and low interest rates made homeownership less expensive for those in a better financial position, thereby tempering demand for the industry. Therefore, industry revenue is expected to increase in the five years to 2014, with a slight jump in 2014.
The Apartment Rental industry is extremely fragmented, with the four largest players accounting for less than 3.0% of industry revenue in 2014. Most rental units are owned by small companies or individuals who rent out residential property they own. In fact, in some cities, over a quarter of condominiums are rented out by their owners. This prevalence of small-scale players fragments the industry. Furthermore, due to the limited amount of investment grade (complexes with 200+ units) buildings in Canada, it is very difficult for large companies to gain the scale needed to capture more market share. In the five years to 2014, market concentration has only slightly increased, as revenue gains made by large players were offset by the entry of smaller competitors.
According to IBISWorld Industry Analyst Maksim Soshkin, “In the five years to 2019, industry revenue is forecast to grow at an annualized rate.” A projected decline in the national unemployment rate and increasing incomes will drive demand for rentals, allowing landlords to raise rents. However, while this is anticipated to make homeownership more affordable, “stricter mortgage standards and climbing interest rates will temper the housing market and reduce its threat to the rental market,” says Soshkin. Additionally, positive migration and a climbing urban population will add to industry demand.
For more information, visit IBISWorld’s Apartment Rental in Canada industry report page.
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IBISWorld industry Report Key Topics
Operators in this industry act as lessors of buildings that are used as residences or dwellings. Industry participants are owner-lessors of residential buildings and establishments that rent real estate and then act as lessors by subleasing it to others. In addition to apartment rentals, the industry also includes attached and detached houses and row houses.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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