Housing Slowndown Could Wreak Havoc on Rental Prices
With rising rental demand outpacing available inventory, rent prices rose an average of 9% across the country in April compared to last year.
The average monthly rent reached $1,821 in the month, continues its upward trend from the low of $1,676 seen last April during the pandemic. It’s still shy of the pre-pandemic rent levels of around $1,845 in 2019 and 2020. Of course, location ties into this.
Rises in rent was most pronounced in Vancouver, which saw average year-over-year increases of 17.2% and 23.7%, respectively.
“If the resale market cools, demands by necessity shifts into rentals,” states real estate analyst Ben Rabidoux of Edge Realty Analytics. Ben writes in his most recent newsletter that with “strong population growth, we end up with a dramatic strengthening in the rental market in major metros.”
Average Rent Prices Across Canada
Here’s a snapshot of some of the average rent prices from across Canada, along with the monthly percentage increase:
Strong Demand Expected to Keep Pushing Prices Up
On top of the normal increase in rental demand during the spring, expected demand is to be higher than usual because of current housing conditions.
“Higher interest rates and a cooling ownership housing market could push more demand into the rental market this spring,” Ben Myers, president of Bullpen Research & Consulting, wrote in the March report.
The increase in the rental demand with the current economic recovery, return to pre-covid employment levels and increase in net international migration is creating stress on the rental market.
The current outlook is that both rental demand and prices will continue rising throughout the year.
“Rental affordability continues to pose a significant challenge across the country [and] is set to decline from increasing rental demand and low stocks of rental housing,” according to the latest Rental Market Report from the Canada Mortgage and Housing Corporation (CMHC).
1 in 3 Canadians Renting
“According to 2016 census data, nearly 30 percent of Canadians, or 4.4 million households, rent their home, and statistics from the Canadian government show they’re under increasing pressure,” stated by CBC News on March 10, 2022.
CMHC recently reported that a two-bedroom apartment rental is beyond the reach of the average person who works full time in many cities. Vancouver and Victoria are on that list, along with other cities across Canada.
According to the federal government, housing is unaffordable when housing costs are more than 30 percent of a person’s income.
We are in a housing crisis and it looks likes it may only get worse.
It is rumoured that the Bank of Canada is to increase interest rates again on June 1, 2022. There are talks of more rate increases to follow. If this is true, the Canadian rental market could be in more trouble than the real estate market.
The Bank of Canada’s goal to lower inflation and reduce our debt load may have a massive impact on low-income families and individuals. High interest rates could push more demand into a rental market that is already struggling to keep up with its current demands. Unfortunately, rental rates will increase and this will widen the gap in affordable housing.
What is the right plan?
Housing prices, whether you are renting or buying, are seeing steady yearly increases and it’s time to assess what one may do financially to protect themselves in the long term.
- Have you re-evaluated your budget? Are you able to make minor adjustments that could allow for the investment of $25 or more into a First-time Home Buyers Savings Account or an investment account that could allow for the savings of a down payment or retirement plan?
- Have you considered multi-generational housing? Do you get along with your in-laws? Multi-generational housing is not a new concept. At its peak in Canada in the 1940s, this is now one of the largest growing trends on the Canadian real estate front. Buying or renting, sharing the costs of housing among family is seeing a rise and with the cost of living continuing to climb, we can see why.
- Are you living within your means? Sometimes this can be a hard pill to swallow and may have you saying “no” to the activities you enjoy. Budgets need to be evaluated and if you find yourself to be one of the many Canadians stressed at the end of the month, you may need to batten down the hatches-Canadians are in for a bumpy ride.
- When is the last time you received a raise? Are you due for a raise? There are a lot of factors that go into determining when an employee is given a raise. If it’s been a few years since you have had a pay increase and you are constantly being praised as a valuable worker and your pay currently sits below the standard for your industry, sit down with your employer.
If want to become a homeowner, it will take some strategic planning, possibly replacing costly activities with more budget-friendly ones. Creative thinking may be necessary in a market that may slow down, but to what degree?
Come work with a qualified and knowledgeable broker so that you can have an enjoyable and stress-free home buying experience.