IQALUIT - The rental market in Iqaluit remains tight, according to a report released by the Canada Mortgage and Housing Corp. (CMHC).

Of the 1,230 non-public housing units in the city, only 18 were vacant when the survey was conducted late in 2007, resulting in a vacancy rate of 1.5 per cent.

Nunastar Properties Inc., whose Creekside Village townhouses in Iqaluit are pictured here, says it has a one per cent vacancy rate for its 300-some units in the Nunavut capital. - photo courtesy of Bruce Alton

That's better than 2006, when the vacancy rate was nearly zero per cent, but not by much.

"It's not much of an increase at all," said Richard Goatcher, senior market analyst with CMHC. "It's pretty tight."

Rents are also going up for most apartment types in the capital.

Average monthly rent for a two-bedroom apartment climbed to $2,104 in 2007, compared to $2,094 in 2006.

By far the largest rental increase was felt by renters of four-bedroom apartments, for which the rent went up a whopping 18 per cent. In 2006, the rent for those units was at exactly $3,000. That amount rose sharply by $538 in 2007.

Despite rising rents, however, Iqaluit has lost its dubious distinction as the country's most expensive city to rent a home. Fort McMurray has edged ahead, and Iqaluit is second.

Goatcher said the high cost of building up North partially accounts for the equally high rent.

"Part of the problem is the cost of construction and how apartments are financed, the rent levels required to make building economically feasible," he said.

"There are limits as to what people are willing and able to pay."

While Iqaluit's position as Nunavut capital and financial hub means more government workers and Northern businesses want to locate themselves there, the price to live there might be considered too steep, he added.

"When they're looking at $3,000 a month rent, they may not be paying that in Ottawa. How are you going to get them to move to Iqaluit?"

There is a demand for home ownership in the territory, Goatcher said. As lots are developed and new homes are built, the rental market will ease.

"The good news, there are multiple units under construction and planned. Supply is coming," he said.

"But it's a slow process."

According to CMHC data, the value of building permits for single and multi-family residential development in Iqaluit in 2007 was $5.9 million

Gord Durnford, a rental officer with Nunastar Properties Inc., which has 300 units in Iqaluit, said the supply of new homes is not meeting demand.

"We have about a one percent vacancy rate. That's representative of all our units," said Durnford.

"I get four or five housing applications a week for housing. That's a lot when you don't have anything to offer."

While the demand for housing is being partly met by new construction - construction of the second phase of a new subdivision was completed last fall - it's not enough, added Durnford.

"They're building a lot of the wrong type of units. They should be looking at building more family-oriented units.

"They're building one- and two-bedrooms. Most of my applications are for family housing."

- with files from Jennifer Obleman