CMHC financing powers sales despite slowing rent growth
The Canadian multi-suite residential rental market displayed signs of steady growth in the third quarter of 2024, driven by increased sales activity and a stable economic backdrop, according to Morguard's latest report.
Sales of Canadian multi-suite residential rental properties reached their highest quarterly total since early 2022, attributed to a surge in large-scale property and portfolio availability. The report noted that favourable financing options provided by the Canada Mortgage and Housing Corporation (CMHC) played a critical role in boosting activity.
“This jump can be attributed to an increase in large-scale property and portfolio availability,” the report stated. “Attractive Canada Mortgage and Housing Corporation financing supported the rise in sales activity.”
While investment increased, rent growth in the sector showed signs of moderation. Rentals.ca data revealed a 5.4% year-over-year increase in the average asking rent across Canada’s 35 largest markets in September. However, rent growth is expected to continue softening in the near term.
“The multi-suite residential rental sector remains popular with a range of investment groups seeking attractive yields and stable and rising income streams,” said Angela Sahi, Morguard’s president and chief operating officer. “While some buyers are waiting for borrowing costs to decline further, the continued easing of inflation and future rate cuts have created a solid foundation for Canada’s real estate market to strengthen starting next year.”
On the commercial front, industrial property investment activity slowed during the quarter, following a significant rise in the second quarter. The decline was primarily due to a limited supply of available properties, even as new supply in the leasing market outpaced demand.
The Canadian office leasing market demonstrated mixed performance. The Greater Toronto Area recorded over 650,000 square feet of positive net absorption, while the Greater Vancouver Area struggled with negative net absorption. Tenants continued to favour shorter-term subleases that were already upgraded and ready for occupancy.
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Morguard forecasted the economy to grow by approximately 1.5% in the latter half of 2024, with a stronger growth trend anticipated in early 2025. The Bank of Canada is expected to further cut interest rates through the end of 2024 and into early 2025, a move seen as critical to fostering economic recovery and supporting the real estate sector.
“The Bank of Canada’s rate cuts will be crucial to the real estate sector’s overall resilience, helping to drive the economic recovery from the effects of monetary tightening,” Keith Reading, senior director of research at Morguard, said in the report. “As the real estate market regains momentum, investor activity will increase in the second half of 2025.”
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