Economist notes population growth plays key role in housing market
The Canadian rental market is becoming increasingly competitive with high interest rates and rising inflation continuing to deter buyers, it has been revealed by Rentals.ca.
Increasing demand in the rental market and population growth has fuelled the undersupply of purpose-built rental units, it was suggested in a Canadian Press report. As a result of this mix of factors, renters are growing more frustrated than usual.
“It’s definitely been stressful,” said Marissa Giesinger, a 23-year-old Mount Royal University student who, alongside her boyfriend, is looking for an affordable place to rent. They have spent six weeks looking through listings, only to find most come along with many application procedures and a high price tag. Adding to the complexity is finding a landlord who would allow the couple to keep their pets, two dogs and a cat.
What are the implications of increasing demand in the rental market?
Data from Urbanation.ca revealed the average asking rents for newly-listed units in Canada rose to a record high of $2,117 last month, an increase of 1.8% between July and August and an increase of 9.6% from a year earlier.
Asking rents between May and August in Canada increased by 5.1%, or an average of $103 per month.
Rentals.ca found Vancouver and Toronto to have the highest rents in the country. In August, the average rent of newly-listed one-bedroom properties in Vancouver was $2,988, while two-bedroom units averaged $3,879.
Meanwhile, in Toronto, the average rent of newly-listed one-bedroom properties was $2,620, while two-bedroom units averaged $3,413.
Giesinger said she and a roommate paid $1,000 per month for the two-bedroom basement unit they rented a few years ago, but now a “super tiny” one-bedroom place comes with a rent price tag of $1,350 per month.
Giacomo Ladas, communications director for Rentals.ca, has described it as a “perfect storm,” which he noted wouldn’t ease up anytime soon.
“What this does is create such a burden on this rental housing market that even though we’re out of the (busy) summer rental season, there’s so much demand that (these conditions are) going to continue like this until the fall and into the winter,’’ said Ladas.
The Canada Mortgage and Housing Corp. said Canada needs to build 3.5 million additional homes beyond what’s planned before the market reaches some semblance of affordability. It found that the annual pace of housing starts was down 1% to 252,787 units in August.
Rishi Sondhi, an economist at TD Bank Group, said 2023 had been a strong year for starts as the industry is responding to elevated prices by building at a robust pace. He said supply has been struggling to keep up with demand given the population growth.
“In the short term, it would be unrealistic to expect too much of a reprieve simply because population growth is likely to remain strong through the duration of this year - and that’s really one of the big fundamental drivers,’’ said Sondhi. “It’s unlikely to expect affordability in the ownership market to improve too much either because we think the Bank of Canada (key rate) is going to be on hold for the remainder of the year, but there is some risk that they take rates even higher, especially if inflation doesn’t cooperate.”
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