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Ask the average renter and they’ll tell you: Canada rent It has risen sharply in recent years.
this The latest data from Rentals.ca and Urbanation The average rent for all property types exceeded $2,200 for the first time in May. This is up 9.3% year-over-year, the same increase as last month.
In some of Canada’s most unaffordable markets, such as Toronto and Vancouver, rents for two-bedroom apartments now exceed $3,000 per month.
While rents in most cities outside of Ontario and British Columbia remain well below that level, cities like Edmonton and Regina saw average annual rents for one-bed units rise by double digits in May.
Average rent for a two-bedroom apartment in each Canadian city as of May 2024.
Urbanation/Rentals.ca
Economists interviewed by Global News say Canadian renters also have reason to be hopeful after years of stress in a tight rental market.
While Canada’s moves to increase rental supply and slow population growth should help “at least stabilize” soaring rents in some areas, experts warn that renters shouldn’t expect big rent cuts anytime soon.
“Even if rents aren’t growing as fast, they’re still going to remain high,” said Randall Bartlett, senior director of Canadian economics at the Desjardins Group.
Where are rents headed? It depends on where you live
The rent stabilization that experts expected has already begun in some markets.
Data from Rentals.ca and Urbanation showed that while rents rose nationally on both a monthly and annual basis, the three-month average still fell 0.4 per cent, which the report categorised as a “moderation” in rents following sharp increases last year.
While Toronto and Vancouver remain among the most unaffordable cities to rent, thankfully, the annual rate of change in both cities has begun to turn negative.
Two-bedroom apartment prices fell 2.0 per cent and 3.6 per cent year-over-year in Toronto and Vancouver, respectively, in May, with both cities also seeing slight monthly price declines.
Montreal is firmly in the middle, with prices for one- and two-bedroom apartments rising in the single digits each year, but still hundreds of dollars cheaper than Toronto and Vancouver.
More affordable markets like Saskatoon, Regina and Edmonton continue to see annual rent surges, even though monthly rents are still far lower than cities in Ontario and British Columbia.
Bartlett said rents in Canada’s most expensive markets may have peaked as renters move to markets they can actually afford.
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Recent Angus Reid polls show that residents in Ontario and British Columbia are increasingly looking to move out of cities in search of more affordable housing. Three in 10 Canadians surveyed said they are considering moving Leaving the province due to poor housing affordability.
Ipsos poll Earlier this year, I conducted a special study for Global News. The survey showed that more than a third of respondents (36%) will be looking for a new rental unit in 2024.
Angus Reid’s survey shows that new immigrants in particular are reconsidering where they settle. Two in five people said they were considering moving Go to other provinces or even go abroad.
“That’s why cities like Moncton, Calgary and Halifax are growing so quickly, even though they’re not necessarily popular locations for international tourists,” said Rachel Battaglia, an economist at Royal Bank of Canada.
Relatively affordable Alberta remains the most popular destination for Canadians to immigrate to, according to the Angus Reid survey. Bartlett said that demand is also what’s driving rent spikes in markets like Edmonton, where the average rent for a one-bedroom apartment jumped 16.4 per cent in May.
“We’re seeing a significant influx of not only international migration into Alberta, but also from other parts of Canada as young Canadians look for cheaper pastures.”
The pace of construction remains strong
One of the reasons rents are surging is the same reason many homeowners are paying more on their mortgages: higher interest rates from the Bank of Canada.
Bartlett noted that while Canadians with mortgages typically experience rate increases more directly than renters because they enter a higher borrowing cost environment at the end of their loan term, those pressures can also trickle down to the renting population.
For example, when mortgages become more expensive, landlords face financial stress, which can cause them to pass on higher costs to tenants. In addition to higher interest rates, rising renovation and utility costs also add to monthly rental bills, Bartlett said.
“Of course, costs from all sides have also pushed up rental costs,” he said.
Higher interest rates also make it harder to enter the housing market, leading to more renters competing for an equally scarce supply of rental homes.
But despite rising rates, one part of the equation remains strong: the pace of new rental construction.
Data shows that rental housing starts in both 2022 and 2023 will exceed 80,000 units, exceeding the pre-pandemic average. A report released this week by Royal Bank of CanadaRBC expects builders to surpass that level by 2024.
“This is no small matter,” said Battaglia, who wrote last week’s report.
She told Global News that obstacles to getting construction started have been numerous lately. High borrowing costs tend to discourage new projects, just as they may prevent homeowners from renovating, and the Canadian construction industry is also facing a significant labor shortage and rising global material costs.
Despite those hurdles, government incentives and clear signs of continued demand in the rental market helped convince builders to step up their efforts, Battaglia said.
and Want Canada to double its housing construction paceThe federal government’s latest budget came with a slew of announcements, including a GST exemption for purpose-built rental properties and capital cost allowances to speed up apartment construction.
In addition to these initiatives, Battaglia noted that municipal and provincial governments have come up with their own initiatives, such as cities relaxing zoning restrictions to attract federal housing funds.
“It’s been great to see these joint efforts, and we feel like they’ve clearly paid off,” she said.
“Of course, there is still a lot of work to be done, but it’s great to see the progress.”
Population growth will affect rents
Despite the progress on the supply side, experts like Bartlett point out that demand — or the number of people looking for apartments — is the main driver of future rental costs.
Canada has experienced a population boom in recent years. The population will increase by more than 1.2 million in 2023Statistics Canada said that was the fastest annual pace of growth since 1957. Temporary immigrants accounted for 2 per cent of the 3.2 per cent growth.
Desjardins expects rent increases to “slow down significantly” in the coming months. Bartlett wrote in a recent reportthanks largely to Ottawa’s announced plan to cap the number of non-permanent residents (NPRs). The federal government is seeking to reduce the NPR ratio to 5% of Canada’s population within the next three yearslower than the current 6.2%.
“If the federal government is successful … it will take some pressure off the rental market in Canada because we’re seeing a level of supply of homes that we’ve never seen before,” Bartlett said.
“If we get some relief on the demand side and additional units on the supply side, that could at least help stabilize price growth in Canada.”
But Battaglia noted that curbing the flow of temporary migrants now would not make it easier for existing renters looking for new places to live.
She believes Canada needs an “injection of supply to help rebalance” the rental market, but the latest batch of homes coming online will likely be immediately absorbed by pent-up demand that has built up in recent years.
Battaglia said that would limit the impact any new rental units would have on prices in the near future.
“We think that a significant increase in rental housing stock should help relieve some of the pressure. But we’re starting from a very, very tight position,” she said.
“So do I think rents will fall? Not likely, at least not nationally.”
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