Renters' woes are continuing
Canada’s apartment market remains under immense pressure, with rent growth slowing but not fast enough to make a real difference for affordability.
Yardi Canada’s multifamily report showed that the national average in-place rent – the average rent paid by tenants, including those renewing or signing new leases – rose by $26 to $1,547 in the third quarter. Over the past year, the total increase was $90, or 6.2% year over year, a slight deceleration from earlier quarters.
Lease-over-lease rents, which are the rents paid for units when a new tenant moves in, have slowed for the first time in two years. Growth in this segment dipped below 10%, landing at 9.1%, which is a drop of 90 basis points from Q2.
Despite the small decline in rent growth, vacancy rates remained stubbornly low. The national vacancy rate ticked up slightly by 20 basis points to 3.2% in Q3 2024, the highest it’s been since mid-2022.
However, this minor increase did little to ease pressure on renters. Some new developments are taking longer to fill vacancies, as landlords are prioritizing high rents over quick lease-ups. Some property owners are lowering rents just to increase occupancy, but the overall supply-demand imbalance persists.
“Canada’s apartment market continues to reflect extremely tight conditions,” the report read. “Policymakers recognize that supply must keep up with demand, but actions to limit population growth and increase supply will take time to implement and take effect.”
The shortage of rental supply is part of a larger housing crisis, one that could take years to address. According to Oxford Economics, Canada needs 4.2 million new homes to balance its housing market. This includes 2.9 million units required to meet the needs of new households and 1.3 million more to make up for underbuilding in past years.
Without this, achieving a "normal" vacancy rate will be difficult.
Oxford estimated that the number of households in Canada will rise from 15.7 million in 2023 to 17.5 million by 2030 and to 18.6 million by 2035, placing further strain on the already overwhelmed rental market.
The economic environment offers a glimmer of hope. The Bank of Canada has been cutting interest rates to relieve pressure on the market. Since June, rates have fallen by 75 basis points, reaching 4.25% by mid-October. More cuts are expected, as inflation has slowed significantly, dropping to 1.6% in September, well below the bank’s 2.0% target. Analysts expect the rate to stabilize around 2.5% in the coming year.
Still, government measures meant to improve affordability have sparked concerns.
“To spur the residential market, the Canadian government increased the home mortgage amortization period from 25 years to 30 years,” Yardi Canada said in the report. “The goal is to reduce monthly mortgage payments and give home buyers more spending power, but there are concerns that the maneuver will increase demand and raise prices of for-sale homes.”
The average home price in Canada was just under $670,000 in September, up 2.1% year over year. Provinces with traditionally high prices, such as British Columbia (average price of $948,500 as of August, -2.2% year-over-year) and Ontario ($851,000, up 0.2%), saw either flat or slight decreases in prices.
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Meanwhile, more affordable provinces like Alberta (average price $491,000) and Quebec (average price $538,000) saw price increases of 9.8% and 6.7%, respectively.
"The Canadian apartment market remains resilient, but the growing gap between housing demand and supply is shaping rental conditions. Although rent growth has cooled slightly, affordability remains a major issue for renters across the country," said Peter Altobelli, vice president and general manager of Yardi Canada.
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