A paradoxical housing market has emerged recently in Canada. On the one hand are the falling housing prices and sales; on the other are rapidly escalating rents that have increased pressure on renter households.
Recently released data by the Toronto Regional Real Estate Board (TRREB) has revealed that the average rent for a one-bedroom apartment, the most common type of rental abode, increased by 20 per cent year-over-year in the second quarter of 2022.
The rents for two- and three-bedroom apartments increased by 15.3 and 12.8 per cent, respectively. At the same time, supply is tightening. Rental apartments listed on the TRREB platform declined by 30 per cent in the second quarter compared to the past year. The number of leased one-bedroom apartments also declined, by 16 per cent annually.
Townhouses constitute the other type of housing that is popular among renters. The increase in townhouse rents was relatively lower, with two-bedroom townhouses increasing by 11 per cent over the past year. However, trends there were not uniform, with the number of leased three-bedroom townhouses increasing by 25 per cent in the second quarter compared to a slight decline in two-bedroom rental townhouses.
The increase in rental demand is partially tied to the resumption of economic activities constrained earlier because of COVID-19. For example, college and university students, who had primarily retreated to parents’ homes during the pandemic, will be back on campus in September. They have been actively leasing residences near university campuses since May.
Another contributing factor is teleworking, which allowed many to work remotely from home during the pandemic. As a result, some workers gave up relatively smaller yet expensive leases near central employment hubs for cheaper and larger dwellings in smaller towns.
With employers calling their workers back to offices, the demand for rental properties near employment hubs has been increasing, putting pressure on rents. But rents have risen across the region, not just in centrally located neighborhoods, thanks to tight market conditions. For example, TREB data revealed that 76 per cent of the apartments listed in the City of Toronto were leased in the second quarter.
However, 81 percent of the listed apartments in the suburban York Region were leased, suggesting that the demand for rental space has been high in the suburbs as well. A similar picture has emerged across Canada. The Canada Mortgage and Housing Corporation (CMHC) reported a tighter rental market in Halifax, where the vacancy rate fell below one per cent. Even in less populated markets, such as London, Ont., asking rents in June increased by 28.5 percent over the past year, according to data compiled by Rentals.ca and Bullpen Research and Consulting.
