Rental Market Surge: Average Asking Prices in Canada Reach Unprecedented Heights

As the Canadian real estate market continues to face economic challenges and interest rate hikes, the average asking price for rental units in Canada soared to a new record in July, reaching $2,078.

As the Canadian real estate market continues to face economic challenges and interest rate hikes, the average asking price for rental units in Canada soared to a new record in July, reaching $2,078. This surge in rental prices comes just after setting a new high record in June, reflecting a continuous upward trend. The month-over-month growth of 1.8%, the fastest in the past eight months, demonstrates the intensifying demand and limited availability of affordable housing options nationwide.

According to the latest rental report by Rentals.ca and Urbanation, July witnessed the fastest pace of growth in the past three months, with an impressive 8.9% annual increase in rents. Compared to the same period in 2021, average asking rents in Canada have climbed by a staggering 21%, resulting in an additional expense of $354 per month for tenants.

Several factors contribute to this significant rise in rental prices. Firstly, the surge can be attributed to a surge in post-secondary students signing leases before the fall semester. With unprecedented levels of population growth and a shortage of affordable housing options, students are increasingly competing for limited rental units, driving up prices. Additionally, potential homebuyers have been deterred from making purchases due to rising interest rates, resulting in increased demand within the rental market.

Realtors have reported that some prospective buyers have remained on the sidelines throughout the year, wary of the impact of successive interest rate hikes on their buying power. In June, the average price of a home reached $709,218, marking a 6.7% increase from the previous year. The Canadian Real Estate Association predicts a modest decrease of 0.2% in the national average home price for 2022, followed by a rise to $723,243 in 2024. These high home prices are pushing aspiring buyers into the rental market, intensifying competition and further driving up rents.

In July, the average asking rents for purpose-built condominiums and apartments exceeded $2,000 for the first time, reaching an average of $2,008. One-bedroom apartments experienced the highest annual increase of 13% and a monthly increase of 2.5%, resulting in an average rent of $1,850. Two-bedroom units commanded an average rent of $2,191, while three-bedroom units reached a slightly higher average of $2,413. On the more affordable end, studios had an average rent of $1,445.

Analyzing regional data, Calgary stands out as the city with the fastest rent increase among Canada's major cities, with a year-over-year growth of 16.1% in apartment rental prices. Although this growth has slightly slowed down from June's figure of 18.4%, average rents in Calgary reached $2,036. Montreal also experienced significant rent growth, rising from 11.2% to 15.3% in July, bringing the average rent in the city to $1,987. Additionally, Greater Montreal stands among the top five mid-sized markets with rapidly increasing rents. Laval witnessed a remarkable year-over-year growth of 28.5%, reaching $2,011 in rent, while Cote Saint-Luc experienced a 23% increase, reaching $2,306.

In contrast, Toronto and Vancouver observed a slower rate of annual rent growth in July, with 11.5% and 12.2% increases in average asking rents, respectively. Vancouver maintains the highest average rent among major markets, reaching $3,340 and showing a 2.9% monthly increase. Turning our attention to British Columbia, Richmond and New Westminster showcase the fastest annual growth rates, with 27% and 20.7% respectively. Meanwhile, in Ontario, Brampton and Scarborough in the Greater Toronto Area witnessed significant rent growth, with apartment rents rising by 18.6% in Brampton and 18.2% in Scarborough.

The rental market has also experienced a rise in asking rents for shared roommate accommodations across several provinces. In B.C., Alberta, Ontario, and Quebec collectively, average roommate rents increased by 16.1%, reaching $971. Quebec witnessed the most rapid yearly increase at 23.8%, with an average rent of $901, while B.C. achieved a 20.4% rise, averaging $1,163. Alberta's roommate rents rose by 14.4% to reach $810, and Ontario experienced a 7.1% growth, resulting in an average of $1,009. Notably, Vancouver and Toronto held the leading positions for average asking rents in roommate rentals, averaging $1,455 and $1,296 respectively.

With the continuous upward trend in rental prices across Canada, both renters and potential homebuyers face challenges in securing affordable housing. The increased competition and limited availability of rental units have played a significant role in driving up asking rents. While factors such as a lack of affordable housing and a surge in post-secondary student leasing contribute to this spike, the current economic landscape and interest rate hikes have also influenced the demand within the rental market.

The unprecedented spike in average Canadian rental unit asking prices observed in July reflects the intensifying economic challenges and interest rate hikes faced by the real estate sector. The surge in rental prices is driven by various factors, including increased interest from post-secondary students, population growth, and homebuyers postponing purchases. The growing demand for rental units, coupled with limited housing options, has propelled rental prices to new heights. Aspiring buyers find themselves priced out of the homeownership market, further exacerbating the competition within the rental market. With certain regions experiencing more rapid rent growth than others, it is clear that renters across the country face a challenging and competitive housing market.