As House Prices Drop, Rental Rates Continue to Increase Across Ontario

Despite real estate prices declining in numerous markets, the cost of rent in southern Ontario continues to trend upwards.

As we’ve recently reported, house prices have plunged in major cities across the GTA and Southern Ontario in response to rate hikes by the Bank of Canada to its policy interest rate. The most affected markets saw the average price of a detached home fall by 18 – 22% in under three months. That said, the dramatic drop in home prices has not led to an increase in home sales, a slow-down in rental demand, or a decrease in the price of rent.

In fact, the competition for rental units has increased, especially in the GTA. While rental listings and transactions were down year-over-year in Q1 of 2022, the percentage of rental transactions as a share of all real estate listings was up on a year-over-year basis. This continued high demand for rental housing and the dwindling supply of homes for rent has resulted in hearty rent increases across numerous GTA and Southern Ontario markets, even where homes sold for substantially less than they did just 120 days ago (see infographic below).

Here are some of the more notable rental rate increases for a single-family, 3-bedroom home that Konfidis has been tracking since December 1, 2021:

• The city of Guelph has seen the highest rent increase from a low of $2,390/month to $2,860/month, an increase of 19.7% in 148 days.

• Vaughan saw a significant increase in the price of rent as the average rental rate is now $3,680/month, a 14% hike from an average of $3,229/month 118 days ago.

• Halton Hills experienced one of the most rapid rent increases in Ontario with the average cost of rent rising by 12.3% in just 63 days – from $2,754/month to $3,094/month.

• Cambridge saw double-digit rent increases from a low of $2,416/month to $2,658/month, a 10.0% increase in 144 days. Cambridge experienced one of the highest drops in the average sold price of a detached home. In just 70 days from a peak price of $1,125,262, the average sold price dropped by 18.8% to $914,122.

• In Kingston, rent increased by 9.8% in 77 days shooting up from $2,300/month to $2,526/month.

• Similar gains were also seen in Burlington as the average rental rate went from $3,139/month to $3,435/month, representing a 9.4% increase in just 89 days.

There are indications that the increases in monthly rental rates in Ontario are likely to continue moving forward.

Click on the infographic to view rental rates per property listing.

Outlook for the Rental Housing Market

While interest rate hikes by the Bank of Canada to its overnight lending rate are expected to continue until it reaches approximately 2-3% (it’s currently at 1%), previous increases earlier this year priced more Canadians out of the mortgage market, adding to the number of Ontarians in the rental housing market. Further rate hikes will likely compound the number of families needing to rent their homes.

Another factor that will impact Ontario’s rental housing market is the reopening of Canada’s immigration system. Plans to increase immigration targets to fill labour market shortages and grow the Canadian economy will accelerate an already rising population growth. This will likely translate to a continuing demand for rental accommodation and support rental rate increases.

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