News: Housing cool-down ignites rental market wars
- Shael Soberano
- Jun 16, 2022
- 4 min read
In this week's Industry News (Week of 13 June 2022).
‘It’s a dog eat dog world’ as housing cool-down helps ignite rental market wars | The Globe and Mail
Just as Canada’s home sales and prices cool off, the rental market is catching fire. Across Canada, renters are now saving hundreds of dollars over owning.
Rents in many parts of the country are nearing or surging past prepandemic records, just as property values and home resale transactions declined for the second consecutive month in May, according to national data released on Wednesday.
The average asking rate on vacant units available on Rentals.ca, a rental listings site, reached $1,888 a month in May. That was up more than 10 percent from a year ago and nearly 4 percent from April, the steepest monthly increase since May, 2019, according to a monthly analysis of Rentals.ca listings compiled by Bullpen Research & Consulting Inc.
“It’s a dog eat dog world,” Shakira Spence, 24, an Aurora, Ont.-based strategic communications professional, said of her current experience looking for a rental in downtown Toronto. Ms. Spence, who estimates she has put in around 10 offers since October, said she and her partner went so far as to offer $250 a month above the posted rent for a particularly attractive one-bedroom-plus-den condo apartment with a view of the CN Tower. But even that wasn’t enough: A competitor offered $500 a month more, according to Ms. Spence, who hired a rental agent to help with the search.
Strong immigration, the transition from fully remote to hybrid work, as well as the return of housing demand from students following pandemic lockdowns, are also fuelling competition for rentals, Mr. Hildebrand said. Those pressures go well beyond Toronto and Vancouver. In Ontario, the average rental rate for condo or rental apartments in Kitchener and London was up around 25 percent year-over-year in May, based on Rentals.ca listings. In Calgary, rents were up 20 percent.
“In the single-family market, a property can rent overnight, where potentially in the past it would stay on market for 30-plus days,” said Lauretta Enders, a broker at Calgary-based Emerald Management & Realty Ltd. Demand is coming not just from people who feel priced out of the resale market, but also many who see renting as a long-term solution because it’s more financially attractive than ownership, she said.
Even in the Greater Toronto Area, one of the country’s priciest rental markets, the affordability gap between renting and owning is widening. In the first three months of 2022, average monthly expenses for new condo owners in the GTA were more than $500 higher than the average rent for a unit of the same size, Urbanation calculates. (For condo owners, the estimates are based on a 20 percent down payment and 25-year amortization and include the mortgage payment, condo fees, and property taxes.)
But while demand balloons, the supply of rental housing continues to fall short in many markets. In Ontario, for example, Urbanation estimates the projected gap between rental demand and new supply from purpose-built apartments and condo rentals will grow to approximately 236,000 units in the next 10 years. That’s even as the pace of new rental construction in the province has doubled over the past five years.
It doesn’t help that rising construction costs are leading some developers of purpose-built rentals to postpone or cancel some projects, said Benjamin Tal, deputy chief economist at CIBC Capital Markets. Barring a hit to Canada’s economy and labour market, competition for rentals is poised to get even tougher, Mr. Hildebrand said.
Please find the full article here.
Across Canada, renters gain edge over homeowners | The Globe and Mail
Recent rate hikes have blown up any comparison between the cost of rent and that of a mortgage. No longer is a monthly mortgage payment comparable to the cost of renting a place. Renters, even in expensive urban markets, are saving hundreds of dollars over owning.
A year ago, conditions were much more favourable for those who drew the faulty conclusion that you might as well own because rents and mortgage payments were pretty much the same. Better to build equity than pay your landlord’s mortgage – that was the reasoning.
Rents 12 months ago were cheaper, at around $1,710 on average for all types of accommodation, or an estimated $2,500 to $2,700 for larger rentals. Meanwhile, paying a mortgage was dramatically less expensive.
We don’t want to dwell on the comparative cheapness of rent today because it’s a dead end. Average rents in urban areas are recovering fast from a pullback in the pandemic and rental costs in smaller communities are stretched as a result of the house price growth of the past year. Small towns have less rent stock to accommodate people priced out of ownership.
Please find the full article here.
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Shael Soberano, CFA Konfidis Inc. Chief Investment Officer
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