Urbanation president outlines the most significant current market challenge
Regardless of the Bank of Canada’s subsequent policy rate decisions, renters are not likely to feel any respite from mounting rental housing prices until “significantly more” supply is built, according to Urbanation president Shaun Hildebrand.
“It’s a bit of a vicious cycle as interest rates and rents are sort of aggravating each other at the moment,” Hildebrand said in an interview with BNNBloomberg.ca shortly after the central bank’s January 24 interest rate announcement.
Hildebrand warned that current market dynamics are forcing potential homeowners to remain the rental market for longer, at the same time as mounting capital costs are making purpose-built rental projects much less economically feasible for developers.
Latest figures from Urbanation and Rentals.ca indicated that the average asking rent for all residential property types in Canada reached a new record high of $2,178 in December 2023, representing a 8.6% surge from the $2,005 reading a year prior.
“The recent moderation in the rental market is likely a temporary response to overheated conditions that emerged in the past two years,” Hildebrand noted. “The fundamentals still indicate an undersupplied market will remain. While the recent increase in rental construction is a positive sign, much more progress will be needed before we will see long-lasting supply benefits.”
Amid projections of continued declines in housing supply and affordability throughout 2024, RESCON is urging political leaders at all levels of government to address these issues.
— Canadian Mortgage Professional Magazine (@CMPmagazine) January 5, 2024
Read more: https://t.co/aaL3eBy7zw#mortgageindustry #housingmarket #housingsupply #mortgage
At the same time, Urbanation and Rentals.ca are both expecting the Canadian rental market to become “somewhat more balanced” in 2024, with rent growth expected to veer closer towards the long-term average of approximately 5%.
“Rental demand is expected to remain strong, experiencing some moderation compared to 2023 due to a slowing economy, a reduced number of non-permanent residents, and an improvement in homebuying activity as interest rates begin to decline,” Urbanation and Rentals.ca said.
“A continued rise in apartment completions and an increase in tenant turnover expected for this year should add more supply to the market in the near term and help temper rent growth.”
