Considering the housing crisis across Canada, and the economic theory of supply and demand, it is little wonder the average asking rent for an apartment reached an all-time high in July of $2,078 a month.
This was laid out in the latest National Rent Report by Rentals.ca and Urbanation.
This represents an 8.9% annual increase, marking the fastest pace of growth over the past three months. A 1.8% hike in average asking rents compared to June represented the most rapid month-over-month increase in the last eight months.
Compared to July 2021, average asking rents in Canada have increased by 21%, translating to an additional $354 per month on average.
According to the report, several factors have contributed to this rise, including a surge in post-secondary students signing leases before the fall term, population growth at an unprecedented level driven by immigration, and homebuyers temporarily sidelined by the Bank of Canada’s latest interest rate increase to a 22-year high.
“Canada’s rental market is currently facing a perfect storm of factors driving rents to new highs,” said Shaun Hildebrand, president of Urbanation.
“These include the peak season for lease activity, an open border policy for new residents, quickly rising incomes, and the worst ever homeownership affordability conditions.”
For the first time, average asking rents for purpose-built condominiums and apartments rose above $2,000 in July, reaching $2,008. One-bedroom apartments lead the way, posting a 13% annual increase and a monthly rise of 2.5%. Regarding specific unit types, one-bedroom rents averaged $1,850, followed by two-bedroom units at $2,191, and three-bedroom units at $2,413. Among the more affordable options, studios averaged rents of $1,445.
Consider this. Approximately 4.4 million Canadians rent their homes and make up a third of all households in Canada. At least 40% of those Canadians spend 30% of their income on rent and utilities each month. For about 20%, rent takes up 50% of their monthly income which, according to Pay2Day, puts them in a category closest to being homeless.
Supply (a shortage of housing) plus high demand equals today’s often unaffordable housing.
Calgary’s rental market retained its distinction of having the fastest rent growth among Canada’s largest markets, with annual asking rents for purpose-built and condominium apartments up by 16.1% to $2,036, although it moderated from its 18.4% pace in June.
Meanwhile, Montreal surged ahead with a significant acceleration from 11.2% to 15.3% in July, establishing an average asking rent of $1,987.
The remainder of Canada’s largest markets, says the housing report, witnessed a slower rate of annual rent growth in July. Toronto experienced an 11.5% increase in average asking rents (compared to 15.7% in June) to reach $2,849. Vancouver maintained the highest average asking rent among the largest markets at $3,340, reflecting a 12.2% annual rise and a 2.9% monthly increase.
Greater Montreal emerged among the top five for fastest-rising rents in mid-sized markets. Laval witnessed a notable 28.5% annual growth, reaching $2,011, while Cote Saint-Luc experienced a 23% increase, reaching $2,306.
In B.C., Richmond and New Westminster exhibited the fastest annual growth rates, with 27% and 20.7% respectively.
The rent growth in Ontario was led by Brampton and Scarborough within the GTA, where average asking rents for purpose-built and condominium apartments, saw increases of 18.6% and 18.2%, respectively.
And then there are higher interest rates composed by the Bank of Canada.
“Higher interest rates reduce the incentive to invest in real estate, especially in the condo space,” CIBC economist Benjamin Tal told the CBC. “So if you don’t have those units, that’s another factor driving up the cost of renting what’s left.”
Faced with higher mortgage costs and lower prices, investors basically have two options: Sell and take the unit off the market, or increase the rent.
And neither option is good news for tenants.
