Canadian renters have a tough few year in store as those boxed out of an unaffordable housing market compete for a limited supply of rental homes. Canada Mortgage and Housing Corp.’s (CMHC) new housing outlook released warns that rental market conditions in Canada are expected to further tighten, raising rents in major markets such as Toronto, Vancouver and Montreal.
The existing rental supply is already low, CMHC pointed out in the report, and competition for these units is only getting hotter amid strong immigration levels in Canada. The average rent in Canada was just over $2,000 in March, up 10.8 per cent from the same month last year. The average monthly rent for a one-bed apartment in Toronto rose 22.2 per cent annually. Last year, the average rent for a Toronto unit that changed hands soared 29 per cent from the previous tenant’s rates, compared with a typical increase of around two per cent year-over-year for renters who stayed in their units.
Meanwhile, renters are struggling to become homeowners in Canada’s housing market. While a drop in home prices over the past year has lowered the bar for some Canadians looking to enter the housing market, rising interest rates have meanwhile made it more difficult to secure a mortgage and break into homeownership.
CMHC expects the end of the housing correction is near and will hit sometime before the middle of 2023 in most Canadian cities, while markets such as Toronto and Vancouver are already seeing sales and prices pick up steam. CMHC projects that while home prices are expected to finish 2023 at a lower mark than they did the year before, values are expected to rise through the following years. A lack of homes on the ownership side of the market is expected to be a key factor driving up prices, as competition heats up over limited supply.
Without a realistic on-ramp to homeownership, more Canadians than ever will be fighting for the same rental units, alongside newcomers and foreign students looking for temporary housing while in the country. The challenge of affordability in homeownership will drive up demand for rental units. Greater rental demand in the face of limited supply will lead to tighter conditions in already strained markets and lead to even higher rents. Supply isn't coming fast enough to restore affordability.
CMHC also expects the pace of new homebuilding will slow in 2023 and not return to the highs seen over the course of the pandemic before 2025, which is as far as the forecasts extends. Canada will need to build an extra 3.5 million homes by 2030 to fill in the supply gap and restore a semblance of affordability to the housing market.