Canada Real Estate Market: Rents Keep Rising

Renters in Canada are likely to face some tough times ahead, as the affordable rental housing market begins to exhaust itself, leading to higher rents in vibrant markets such as Toronto, Montreal or Vancouver. According to a forecast by the Canadian Mortgage and Housing Corporation (CMHC), conditions in the rental housing market in Canada are expected to tighten further, increasing competition and driving up the price of rentals.

The rental housing market in Canada remains moderate for now, but competition has begun to heat up with a sharp increase in immigration to Canada and limited supply. Data from Rental Housing Providers shows that the median rental price in Canada was just over CAD 2,000 ($1,464) in March 2023, up 10.8% YoY. In Vancouver, the average rent for a one-bedroom apartment is up 22.2% YoY.

The rental housing market in Canada is in an imbalance due to insufficient supply and also because homeownership is becoming increasingly difficult, despite falling home prices. The decline in home prices is not due to a falling real estate market, but because rising interest rates make mortgage lending procedures extremely difficult.

The lack of owner-occupied housing in the market could be a major factor driving prices up as competition heats up the market when supply is constrained. Without a realistic plan for homeownership, there will be competition for rental housing among all tenants, which will push rental prices even higher.

The CMHC forecasts that Canada will need to build an additional 3.5 million units between now and 2030 to fill the shortfall in supply and restore balance to marketability in the housing market. Currently, the pace of housing construction in Canada is very slow, and it is likely that, in the next two years, it will not be possible to reach the amount as originally planned.

Renters in Canada should brace themselves for higher rental prices in the coming years, as the supply of affordable rental housing becomes exhausted. Whilst the pace of housing construction in Canada is slow, it is hoped that the shortfall can be remedied by building more units to restore balance to the marketability in the housing market. Until that time, renters should be prepared to secure their desired housing by paying higher rental prices, and those looking to own a home may need to explore alternative methods of financing.