Apartments continue to be among Canada’s most desirable investment properties, if a leading REIT’s first-half (2019) performance is any indication.
In its latest report covering the six months ending June 30, 2019, Killam Apartment REIT stated that its Q2 net income was $82.8 million. This far outstripped its $34.9 million figure during the same quarter last year.
The REIT attributed this exceptional performance to its 97.1% apartment occupancy, which was notably larger than the 96.6% seen during the second quarter of 2018. Indeed, the 2019 figure was the highest Q2 occupancy that Killam has ever registered.
These developments were also augmented by the 3.2% growth in the average rental rate. This has led to revenue for the property type growing by 3.5% during Q2 2019.
“With continued high occupancy levels, increasing rental rates is a key focus for revenue optimization. Same property rental rate growth has accelerated over the last six quarters, from 1.8% at Q4-2017 to 3.2% at Q2-2019. Rental rate increases on unit turns and lease renewals averaged 5.6% and 2.0%, up from 4.5% and 1.6% a year earlier,” Killam reported.
The heavy lifters were Ontario and Halifax, where apartment revenues expanded by 5.1% and 4.6%, respectively, on an annual basis.
The apartment sector is highly likely to remain a powerhouse asset class for the foreseeable future. Sustained construction activity involving this property type is boosting housing starts in Canada’s urban markets, latest CMHC figures showed.
The national trend in housing starts was 208,970 units in July 2019. This is in comparison to the 205,765 units in June.
“The national trend in housing starts increased in July, despite a decrease in the level of SAAR activity from June,” CMHC chief economist Bob Dugan stated. “High levels of activity in apartment and row starts in urban centres in recent months continued to be reflected in the high level of the total starts trend in July.”