A recent report by Rentals.ca and Urbanation reveals that despite ongoing increases in rental prices across Canada, changes in the country's interest rates are unlikely to provide much relief for renters. The average asking price for rentals in December surged by 8.6% year-over-year, reaching a record high of $2,178 per month. One-bedroom units experienced an even more significant increase, with asking prices rising by 12.7% annually to $1,932.
Shaun Hildebrand, President of Urbanation, emphasized the robust demand for rental properties nationwide, stating, “When you look at the last two-year period, rents have grown by about 22%. This just speaks to how strong rental demand is across the country right now. This is obviously much faster than income growth and it’s causing a real deterioration of rental affordability across the country.”
Despite optimism from some economists who believe that a decrease in interest rates by the Bank of Canada could stabilize rental prices, Hildebrand remains skeptical. He argues that the persistent underbuilding of rental housing over several decades will limit the impact of such measures. Lower interest rates may encourage some renters to transition to homeownership, and other measures, like a cap on foreign students, may contribute to rental supply, but the overall effect is expected to be modest.
“That should take a little bit of steam out of the market, but still we’re expecting to see rent growth in the five per cent range for the country, which is bringing things back in line with the five-year average,” Hildebrand explained.
Three key factors were identified by Hildebrand as contributors to the challenges in the rental market: record population growth, subdued real estate activity, and a stable economy.
Interestingly, while rental prices experienced significant increases nationally, the two largest cities in Canada, Toronto and Vancouver, saw declines. Vancouver witnessed a 5.8% decrease in average rent in December compared to the previous month, while Toronto experienced a 2.8% decline in the same timeframe.
Hildebrand suggested that the decline in these major cities may reflect resistance to the high cost of living, leading to outward migration toward more affordable markets. Cities like Calgary and Halifax, which experienced substantial population growth, bore the brunt of the rent price hikes.
In conclusion, the report suggests that despite fluctuations in interest rates, the fundamental challenges in the Canadian rental market, such as underbuilding and strong demand, may outweigh the potential impact of such shifts. As a result, renters may not see significant relief from escalating rental costs in the near future.
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