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Rent prices rose in 2023 as Canada saw lowest vacancy rate since 1988

In 2023, Canadians experienced a sharp rise in rental prices, accompanied by the lowest national vacancy rate on record since 1988, according to a report released by the Canada Mortgage and Housing Corp. (CMHC). The housing agency's annual survey conducted in the first two weeks of October revealed a national vacancy rate of 1.5%, down from 1.9% in the previous year, marking the lowest rate in over three decades.

The surge in rent prices was particularly evident in purpose-built rental apartments, with the average rent for a two-bedroom unit climbing eight percent to $1,359 in 2023. This increase surpassed the 5.6% recorded in 2022 and exceeded the 1990-2022 average of 2.8%. CMHC Deputy Chief Economist Kevin Hughes noted that the data did not come as a surprise, attributing the pressure on the rental market to increased demand from demographic changes.

"Demographic changes are definitely substantial," explained Hughes. "You have newly arrived immigrants, young Canadians seeking their first home, and older households needing to downsize. With affordability challenges in the home ownership market, more Canadians are turning to rental options."

The report also highlighted the tightening of the secondary rental market, as the average rent for a two-bedroom rental condo rose to $2,049 from $1,929 in 2022. The vacancy rate for such units fell from 1.6% to 0.9% annually, further emphasizing the strain on rental supply in Canada.

The chronic lack of supply, coupled with statistics that offer little encouragement for substantial increases, poses a challenge to the Canadian housing sector. Hughes expressed concerns about delays in construction projects due to financing issues and labor shortages in many markets.

National Bank of Canada economists Stéfane Marion and Daren King noted the extreme imbalance between supply and demand, predicting that this imbalance is likely to persist for the foreseeable future. The Bank of Canada's forecast of an 800,000 increase in population for both 2024 and 2025, with limited growth in housing starts, further compounds the issue.

Alberta's largest cities, Calgary and Edmonton, stood out in the survey with their lowest vacancy rates in a decade – 1.4% and 2.4%, respectively. The report highlighted a substantial rise in rents in these cities, attributed to accelerated demand from population increases without a corresponding increase in supply.

Toronto recorded a 1.4% vacancy rate, down from 1.6% in 2022, while Montreal was at 1.5%, down from two percent. Vancouver, with a 0.9% vacancy rate, had the lowest among major Canadian markets, remaining consistent with 2022 levels. Ottawa maintained a flat vacancy rate of 2.1%.

In conclusion, the CMHC's report underscores the challenges faced by Canadians in the rental market, emphasizing the need for measures to address the growing demand-supply gap and the increasing financial burden on renters.



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