Behind Calgary’s Hot Housing Market: Rental Reality Check
Calgary Real Estate and Rental Market Update
December 1, 2023 - Written by Jamie Palmer, President/Broker of Power Properties
Navigating Calgary’s Hot Rental Market
The average asking rent for a 3-bedroom house is up 12% year-over-year in Calgary, landing at $2716 according to Rentfaster.ca; while apartments are up 17% at $1718 and $2121 for one and two-bedroom apartments respectively.
At the same time, the average house price in Calgary is up 15% YOY at $725,000 and the average apartment is up 8.45% YOY at $316,000.
If you already own rental property, congratulations, you have made some enormous financial gains this past year, but if you recently purchased rental property, you are probably struggling to produce positive cash flow.
Understanding Cash Flow Realities
The average rent above of $2716 only supports a mortgage, at current rates, of $427,000, never mind property taxes and insurance… So as a shout-out for all you 90’s kids, Run DMC said it best when they said “It's Tricky... it's Tricky (Tricky) Tricky (Tricky)”!
This chart shows just how big a difference there is in Calgary between the cost of ownership and renting
For those of you who are struggling with negative cash flow, unfortunately, your carrying costs have no bearing on the rental value of your property. Here are two extreme examples to illustrate this: say you inherited a house free and clear, would you rent the house for just the cost of the property taxes and insurance, of course not, you would rent it for market rent. If you bought a house with 5% down and had an enormous mortgage, could you get more rent, no, it would still only rent for market rent.
Strategies for Success
Keep the above in mind when your property managers discuss pricing with you, while rents are at record highs, Calgary is not at Toronto or Vancouver pricing yet. I see several properties we have listed that show zero inquiries in the past thirty days, which suggests the price is too high, particularly given how hot the rental market is right now.
It is generally a better financial play, long term, to get a property rented for a lower rent than to keep it vacant for several months holding out for a higher rent (which may never materialize). Ultimately, the rent will increase over time and produce positive cash flow. You can think of the negative cash flow like an installment plan on the larger down payment that would have been required to make the property cash flow positive in the first place.
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Written by Jamie Palmer, President/Broker of Power Properties Ltd.
Jamie Palmer is the President and Broker of Power Properties. He holds a Certified Property Manager (CPM®) designation, the highest designation in Property Management in North America. He earned an Honors degree from the University of Toronto, and he has over two decades of experience in property management.
About Power Properties Ltd.
Founded in 1980, Power Properties has been providing hassle-free property management services to property owners, property investors and non-residents with homes in Calgary, Alberta for over 40 years. Our full-service property management includes everything from move in to move out, so you don’t have to worry about the day-to-day operations of your rental property. With a team of licensed professionals, years of experience, and award-winning service, you can rest assured that your property is in good hands.
