The COVID effect is over. Rental housing markets are on the rebound in major cities across Canada this fall, steadily rising as workers come back to the office and universities and colleges resume in-class learning.
Service-based industries such as restaurants are opening up again too, requiring in-person employees to brew your dark roast. Everyone needs somewhere to live, preferably near their job.
“The rental market is trending upward, shifting from being rather a tenant’s market a year ago – unusual for our large cities – back to a landlord’s market,” says Ben Myers, president of Bullpen Research and Consulting Inc., a residential real estate advisory firm in Toronto. “It was probably the shortest little period where tenants had some control.”
Mr. Myers also does the monthly data analysis for Rentals.ca, producing its National Rent Report. Rentals.ca lists thousands of apartments, houses, townhomes and condos for rent from St. John’s to Victoria.
According to its September 2021 Rent Report, the average rent nationally for all property types in August was $1,763 per month, down 0.3 per cent annually, but up 0.6 per cent monthly and up 5.2 per cent from the recent market low of $1,675 per month in April 2021.
”I thought we were going to see two or three per cent rent growth in 2021, but we essentially got that in the last couple of months, so it’s coming back faster than I anticipated,” says Mr. Myers. “We’ll probably get back to the peak rates we were seeing in 2019 by the end of 2022.”
Sweet deals from developers offering gift cards or a few months free rent to lure tenants into new rental buildings have rapidly disappeared.
“It was really slow last year but now the take-up on new buildings is very strong,” says Mr. Myers. “One of the biggest drivers, at least in Toronto, is a large increase in the luxury rental market, so that’s been pulling rents up as well. The biggest growth in the last six months has been in the 90th percentile rent.”
Cities such as Calgary, Montreal and Halifax have held their own fairly well during the pandemic Mr. Myers reports, and rents in university towns like London and Waterloo, Ont. are seeing big hikes. For instance, rent for a one-bedroom apartment in Kingston, Ont. increased by 15.6 per cent last month, compared to the previous month,to an average of $1,439. In Toronto, you can expect to pay $1,989, a 7.2-per-cent bump.
Besides the influx of returning office workers and students, factors driving rentals sky high include long-term units being repurposed into short-term rentals, more immigration coming into Canada, and less construction of new units. A lot of renters want bigger and better units if they plan to continue working remotely from home for even part of the time, plus many would like a backyard.
”We’re actually building fewer homes than in 2002,” says Mr. Myers. “We’ve also shifted to building vertical properties with smaller units, so someone who needs more space or three bedrooms for a growing family has to bid up for the few existing properties out there.
“It’s what we call the missing middle, the ability to deliver these four-storey walk-up apartments that a family would want to rent – in a neighbourhood, with at least 1,000 square feet. Montreal has delivered a lot of that whereas we haven’t in Toronto.”
Shaun Hildebrand, president of Urbanation, a real estate consulting firm focused mainly on the GTA and Hamilton, says nothing changed fundamentally in the rental market, aside from a very brief exodus of renters from the downtown core, which has reversed itself. Life started getting back to normal, and the underlying trend is that there still isn’t enough rental supply to satisfy demand. In fact, it’s worse.
”Consider that over the last two years, housing prices increased by 35 per cent to an average of over $1-million in the GTA,” says Mr. Hildebrand. “This is making the rental situation worse as would-be first-time buyers get shut out of the market. These would-be purchasers have higher incomes and can pay more for rent so it adds more pressure to the demand side as well as the supply crunch. So now both renters and buyers are facing very expensive housing options in Toronto and Hamilton.”
Mr. Hildebrand says they’re seeing similar trends across the country, particularly in large markets like Vancouver and Ottawa, but also within smaller communities. Rental demand is picking up while there is inadequate supply.
“Bidding wars do occur,” says Mr. Hildebrand. “When we looked at our recent data, we found about a quarter of condo rentals are happening in multiple-offer situations. It’s basically back to where it was pre-pandemic, but the demand has only strengthened. The competitive environment we’ve started to see in the last few months is a trend that’s going to continue.”
Matthew Kuras says he expects to see the downtown Vancouver rental market recovered by spring. As a realtor with The Residential Group Realty in Metro Vancouver, he deals mainly with foreigners who are investors that buy to rent out the units.
”In Vancouver, investors are 50 per cent of the market so the rental market is directly related to the real estate market,” says Mr. Kuras. “It’s actually just starting to pick up now that they’ve opened the border to the United States and Europe. Since a lot of hotels took the opportunity to renovate during the pandemic, the shortage in hotels will probably add to the demand because visitors will want to rent apartments.”
While the luxury market is slow because there’s currently a lot of supply, Mr. Kuras reports Vancouver’s regular rental market is definitely busy.
“Three months ago, it was hard to rent places out, but now they get rented out quickly,” says Mr. Kuras. “We have listings that come up and 250 people apply for one apartment.”
Pricing is based on demand with the market deciding what the price will be when it goes up for rent. Typically, a two-bedroom apartment in Vancouver rents for around $2,500 to $3,000.
”We put it up for a price that the owner wants, plus a percentage on top,” says Mr. Kuras. “If a lot of people inquire, you increase the price but if you don’t get any leads, you have to reduce it.
“It was a tenant’s market during the pandemic until about 10 weeks ago, comparable to the financial crash in 2008. Now it’s reverted and things are getting much tighter, faster. For sure, it’s a landlord’s market now.”