Canada’s rental market: trends, challenges, and what’s next

Credit to Author: Canadian Immigrant| Date: Tue, 19 Nov 2024 15:49:20 +0000

The Canadian rental market has seen some major ups and downs in recent years. From skyrocketing rent prices in big cities like Toronto and Vancouver to changing renter preferences, there’s a lot going on. According to the latest RentCafe “Canada Renter Interest Report” and insights from a Desjardins report on rent inflation, while rent hikes have been a major issue, there’s hope that the market will stabilise in the next few years — thanks to more housing supply and slower economic growth.

Renters struggling with rising rent prices

Over the past year, rental prices in Canada have been steadily climbing, putting a serious strain on renters. Data from RentCafe shows that cities like Toronto and Vancouver saw rent increases of 6-9 per cent. In 2023, the average rent for a one-bedroom apartment in Toronto was around $2,700, while Vancouver was close to $2,400. These price hikes are largely due to high demand, limited supply, and inflationary pressures.

However, Desjardins predicts that rent inflation, while still high, will start to slow down in the coming years. They forecast that rent increases will decelerate as the Canadian housing market stabilises. This slowdown is expected due to slower economic growth and an increase in housing supply, which should help ease affordability issues over time. That said, renters will continue to feel the pressure, especially in larger urban centres.

Shift towards suburban and smaller cities

For years, Toronto, Vancouver, and Montreal have been the go-to cities for renters, but there’s been a noticeable shift in demand. The RentCafe report notes that more renters are now looking to suburban and smaller city locations where rent is more affordable and living space is more plentiful. This shift was accelerated during the pandemic when remote work became the norm. Now, some renters are returning to the city as urban living regains its appeal. For instance, cities like Toronto are seeing a resurgence in renter interest in downtown areas, driven by the return of office work and the convenience of urban amenities.

That said, Desjardins predicts that smaller cities and suburban areas will continue to be popular for renters in the medium term. Cities like Ottawa, Calgary, and even Winnipeg are gaining popularity with renters looking for more space at a lower price compared to bigger metropolitan areas.

Growing demand for amenities

Another big trend in the Canadian rental market is the increasing demand for amenities. Renters are no longer just looking for a place to live — they want extra features that make their home more comfortable and convenient. The RentCafe report shows that people are willing to pay a bit more for things like in-unit laundry, gyms, outdoor spaces, and pet-friendly policies. The rise of remote work has also increased the demand for apartments with dedicated home office spaces.

For landlords and property developers, meeting these demands is key to staying competitive. In larger cities like Toronto and Vancouver, offering amenities has become essential for attracting renters. Those who can provide more attractive living options are seeing higher interest in their units.

Future outlook: slowing rent inflation

While rent prices have been climbing rapidly, there’s hope for relief. Desjardins predicts that rent inflation will start to slow down in the next few years. Their forecast suggests moderate growth in rental prices, with inflation rates moving from double-digit increases to more stable levels. Several factors will contribute to this slowdown:

• Increased housing supply: More housing developments are underway, particularly in suburban areas, which should help balance supply and demand, easing upward pressure on rents.
• Slower population growth: While Canada’s immigration numbers remain high, the growth rate is expected to slow slightly, reducing the strain on rental markets.
• Economic slowdown: As the economy grows more slowly, consumer spending power could also be affected, which may help slow rent hikes.

However, it’s important to note that affordability will still be a challenge in the short term, especially for low- and middle-income renters.

Immigration and its impact on rental demand

Immigration continues to be a significant factor driving rental demand in Canada. The country is set to welcome 500,000 new immigrants per year by 2025, which means demand for rental housing will stay high, particularly in major urban centres like Toronto, Vancouver, and Montreal. But as the RentCafe report points out, this influx of people is contributing to rising prices in these cities. In response, some newcomers are starting to look for rental options in smaller cities and suburban areas, where rents are more affordable.

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