Halifax is going through an apartment-building construction boom the likes of which the city has not seen since the 1970s.
The apartment buildings now under construction in Halifax have a total of 2,282 units, says Matthew Gilmore, Canada Mortgage and Housing Corp.’s senior provincial market analyst.
The national housing agency tracks construction from beginning to end, and Gilmore says this is one of the highest apartment unit totals under construction in Halifax that CMHC has recorded in nearly 50 years.
There are all kinds of reasons for the rise in the number of apartments being built, but he says it probably isn’t the $25-billion Irving Shipbuilding contract to supply combat vessels to the Royal Canadian Navy.
“Apartment development takes too long — the application process, to get the development agreements, to get the land, to get everything in order,” Gilmore says. “It simply takes too long to have very much of this being in response to the shipbuilding contract.”
While he admits it is possible some developers could have started building an apartment structure in anticipation of the shipyard getting the navy contract, Gilmore says not many developers would be willing to take on that risk without other factors playing a larger role.
“A $15 million to $20 million building isn’t the kind of thing you would want to take a lot of risk on if you can avoid it.”
One of those factors is migration from other parts of the province. Gilmore says Halifax is one of the only provincial centres to see an influx of people. Halifax also has net gains in migration from other parts of Canada, as well as immigration from other countries.
“We’ve got population growth, and that lends itself to rental demand,” he says.
Another reason there are so many apartment buildings being built, Gilmore suggests, may be because construction, suppressed during the 2008-09 recession, is coming on stream now that things appear better.
“A lot of projects were put on hold and delayed and didn’t start until midway through 2010. So, given an average 18- to 20-month construction period, that puts them still under construction today.”
He says there isn’t statistical evidence to support his view that a lot of landlords are benefitting from empty nesters and baby boomers downsizing to apartment living, but there is enough anecdotal evidence to make him believe that may be true.
“The baby boom population is a very large percentage of Halifax’s population — well over 100,000 in the city. They tend to be in the 45 to 65 age group and they tend to be at the peak of their careers and their earning potential. So they tend to have a big influence over any market, whether it’s housing or some other product. And they seem to be exercising some options and downsizing and are looking at rental product. So builders are responding to that demand.”
All those positive factors are contributing to the high level of apartment-building construction. Gilmore expects that more than 1,000 units could come on the market in Halifax before the end of this year.
According to a CMHC survey last fall, the average two-bedroom rental on peninsular Halifax cost $1,368 a month. Almost half of all rental units available in Halifax are two-bedroom units.
Gilmore says rental increases have been pretty close to the Halifax inflation rate, which has been two to three per cent over the last couple of years
In Halifax, there is a bias among developers to build more rental apartments than condominiums. The ratio is roughly 10-to-one in favour of apartments.
“We are different from some other major centres across the country, there’s no doubt about that,” says Gilmore. “We still build what we refer to as ‘purpose-built rentals.’ So when we put up an apartment building, nine times out of 10 it is an apartment rental building, as opposed to condos.”
Nobody knows exactly why that is the case, but one of the key reasons may be the cost of construction, which is lower for a rental complex compared with building a condominium project.