The average rents in Canada are expected to continue their upswing this year, with Toronto leading the growth, according to the latest market forecast by Rentals.ca and Bullpen Research and Consulting.
Renters will have to brace for an average 3% increase in housing costs this year. Those in Toronto will need to prepare for a stronger 7% increase in rents.
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Montreal, Ottawa, and Vancouver are also expected to witness a spike in rents by around 3% to 5%. On the other hand, rents are projected to decline by 1% in Calgary and Edmonton.
“The impact of the changes to the mortgage stress test have started to fade as developers and investors look to increase rental supply to offset the increase in rental demand brought on by the decrease in mortgage credit and the spike in population over the past two years,” said Ben Myers, president of Bullpen Research and Consulting.
The average rent for Canadian properties in November 2019 was $1,918, up 9.4% annually but down 1.1% monthly. The median rental rate was $1,850 per month, a 15.6% jump from a year earlier.
The growth in rents over the past year was not consistent across built forms and bedroom types.
“The data shows two-bedroom units have experienced the highest annual growth at 17%, followed by one-bedroom and five-bedroom units at 11%, and three-bedroom units at 10%,” Myers said.
Amongst property types, single-family homes experienced the highest annual price growth at 10.3%, followed by townhomes at 10.3% and rental apartments at 8.2%. Condominium apartments also posted an increase in rents, albeit at a slower rate of 2.6%.
“Basement apartments declined year-over-year, but the sample size is small, and the results are not likely an indication of a big drop in demand for this property type,” Myers said.
Myers said the increase in rents on an annual basis was supported by some of the smaller municipalities such as London, Hamilton, Kanata, Burlington, and Kitchener, which are all experiencing double-digit rent growth when considering all property types.
Over the next year, the growth in rents will be supported by the increasing demand from several Canadians who are increasingly finding it more convenient to rent for various reasons.
“Developers are looking to cater to more affluent renters, including those shut out of the ownership market by increasing prices, younger renters choosing to be tenants for lifestyle reasons, and boomers and empty-nesters trading down from a larger dwelling,” Myers said.
However, this year’s growth could be more muted due to the expected increase in supply.