A funny thing happened during the housing boom – thousands of tenants decided this was the time to stop paying rent and start paying a mortgage.
With interest rates low and house prices skyrocketing with each monthly update, there’s been a steady stream of moving trucks from densely-packed apartment towers to the relatively leafy, spacious suburbs. And the renters who would usually replace the vacating tenants aren’t standing by ready to move – they are staying put until things settle.
This has been good news for real estate agents who love to sell to first-time buyers. It’s been good news for anyone able to afford a house. And it’s been good news to anyone moving into a new rental because rents dropped across the country last year with tenants leaving their units to move to their new owned-homes.
It hasn’t been so great for landlords, of course, but a recent report suggests the bottom may have been reached, and rents will start climbing again for the rest of the year.
Here are five things about Canada’s rental market.
1 – Back to the city
When the pandemic really started to make itself known, columnists wrote thousands of words about the demise of downtown living. Things got so out of hand that Jerry Seinfeld wrote a scathing rebuttal in the New York Times, telling anyone who thinks leaving the city will make their lives better should hurry up and go (and never come back).
“You say New York will not bounce back this time,” he wrote. “You will not bounce back. In your enervated, pastel-filled new life in Florida. I hope you have a long, healthy run down there. I can’t think of a more fitting retribution for your article. This stupid virus will give up eventually. The same way you have. We’re going to keep going with New York City if that’s alright with you.”
A report from Bullpen Research and Consulting would suggest Jerry was on to something. Analyst Ben Myers said people seem to be reconsidering their previous thoughts on the joys of country living.
“Anecdotal evidence from leasing agents suggests that rental demand is increasing in the downtown areas of Canada’s major cities as tenants look to get in at the bottom before rents rise in conjunction with the rise in vaccine distribution.”
2 – Regional differences are important, but…
Canada is a huge country with many regional differences, so it’s kind of silly to talk about the “Canadian Rental Market,” but you do get a sense of what’s happening by taking the big picture view sometimes.
Rents decreased by 8.5 per cent in March compared to the previous March, to an average of $1,685 (that’s $157 lower). While the prices are different in every market, the trends that drove down demand were consistent.
“The pandemic has been with us for more than a year now and has had a dramatic impact on the rental market in Canada,” the report from Bullpen Research and Consulting found. “With few immigrants, few students moving close to school, and few recent graduates moving closer to their first jobs, demand has fallen dramatically.”
3 – 2020 was tough all around
A CMHC report that looked back on 2020 says Canadians found it challenging to pay the rent through the last year. Apartment-building owners reported a 58 per cent increase in arrears from the year before – with total unpaid rent estimated at $150-million.
Things were especially tough for families earning less money – the most affordable units also had the lowest vacancy rates. Less than 1 per cent of rental units in Vancouver and Toronto would be considered affordable to low-income renters.
“The results show that vacancy rates are generally lower for the most affordable units (due to higher competition),” CMHC said. “These units tend to be smaller (predominantly bachelor or 1-bedroom units). Both of these realities raise additional challenges for lower income households, particularly for families requiring more space.”
4 – Rents on the rise?
While rents declined significantly over the last year, researcher Ben Myers said there were signs things were looking better (from a landlord perspective) for the first time in a year.
“There were some signs that the rental market might have bottomed out, as the average rent in Vancouver, Toronto, and Montreal increased in March over February this year,” he said.
As lockdown drags on and schools remain closed, some tenants are moving to larger units. They wouldn’t have been able to afford this last year when rents were higher.
Vancouver is the priciest rental market in Canada, with prices up 2 per cent year-over-year to $2,598 for a two-bedroom rental. Toronto was next with a 0.5 per cent decline at $2,370, while Montreal saw a 3.9 increase to $1,947.
Anyone looking for a deal could take a peek at Saskatoon, which sits at the bottom of the 35 city rankings at $1,021.
5 – But what about house prices?
Anyone who held their breath waiting for the country’s housing bubble to burst would be long dead, but the government is once again trying to cool things down. This time it’s through a foreign buyers tax intended to keep speculators from sitting on empty properties.
But anyone engaged in a bidding war over the last couple of months was likely bidding against their neighbours and friends, not a ghostly spectre from another country nefariously bidding high and then disappearing to their homelands.
UBC professor Paul Kershaw said the measures don’t do enough and do nothing to address more significant, homegrown problems in the market that keeps prices moving higher.
“The [federal] budget does relatively little to reduce wealth inequalities that are emerging between older and younger generations as a result of the ongoing rise in home prices, which have skyrocketed once again during the pandemic,” said Kershaw.
The Canadian Real Estate Association said a lack of listings was behind last year’s increases. Still, the spring has seen more houses hit the market. March set a new record for the number of homes sold at 76,259. The average price was $716,828 – up 31.6 per cent from the same month last year.
It’s almost enough to make you want to rent a cabin in the woods to get away from it all, if they weren’t so expensive too.