Canada’s rental real estate market is showing strong activity

Rental markets are facing increased activity all over Canada, becoming a point of concern for affordability in cities with permanent lack of supply.

Over the years even before COVID-19, rental markets from Vancouver to Prince Edward Island have been facing a dangerous combination of weak rental construction, growing demand and rising prices. Bidding wars have become a usual thing.

Although the pandemic has brought a small relief in many cities as vacancies went up and asking prices were down, restrained by a significant slowdown in population growth, this reprieve was not long-lasting.

In June, the average monthly rent for units on Rentals.ca reached $1,721, marking a 2.7% gain from April, but still not exceeding the prepandemic numbers. In May, housing rents were up by 2.5%, showing the biggest annual gain since the beginning of 2000, Statistics Canada says. Meanwhile, the average year-over-year increase was only 0.8% during the previous six months.

Even stronger demand is expected in the nearest future, as Canada will face a wave of new immigrants. In addition to it, universities plan to return to in-person classes scenario, so we can see more students starting renting.

Many cities are coming back to tight market conditions with low vacancies, increasing a financial influence on renters.

The average rent in the Greater Toronto Area reached $2,289 in Q2, marking a 5% annual decline and a 1.8% quarter gain, Urbanation says. It’s the first rent growth since the beginning of the pandemic.

In case of the condo market, which is Toronto’s main resource of rental units supply, we’ve seen the conditions tightening. During the previous four quarters, there were 50,000 condo lease transactions in the region, which is 58% more than over the previous peak. Leasing is especially popular in the city’s downtown.

“The story of mass shifting from cities to suburbs is definitely exaggerated,” – noted Shaun Hildebrand, president at Urbanation. “Everything is reopening again, and everybody’s coming back.”

In his opinion, the GTA is ready to return to prepandemic vacancy rates and rents by the start of 2022.  “Units are back to multiple-offers situations, rents are growing sharply, and the market is becoming very competitive.”

Of course, renters have another variant – purchase. However, supported by historically low interest rates, buyers have purchased properties in record numbers and pushed prices up. Last month, the average national home price was about $680,000, which is 26% higher than a year earlier. Six-figure price gains are reported not only in case of the major markets, but in bedroom communities and suburbs as well.

“The rental market will become much more important as ownership affordability keeps eroding,” – Mr. Hildebrand says. “It will push more first-time homebuyers out of the sales market, increasing pressure on the rental market.”