Newcomers to Canada Face Escalating Rental Demand

As newcomers to Canada and international students continue to arrive in record numbers, rising rental prices present an ongoing  challenge. 

According to the most recent National Rent Report by Rentals.ca and Bullpen Research & Consulting, the average rent for all property types in Canada hit $2,043 in September. That's a yearly increase of 15.4 percent and a monthly increase of 4.3 percent.

For example, in Calgary, average condo and apartment rents have increased 24 percent year-over-year to $1,770 in September. Rents in Vancouver are up 29.3 percent to $3,225. And in Halifax rents have risen 13.8 percent to $2,052 year-over-year. 

Rental rates continue to rise across Canada.  September’s national average surpassed the record high recorded in 2019 peak by $100.

Largest rental hike since 2019

Ben Myers, President of Bullpen Research & Consulting said “rental demand has increased significantly with the continued interest rate hikes, falling ownership house prices, and changing post-pandemic preferences.”

Myers pointed out that the 4.3 percent hike in average asking rent from August to September is the largest monthly increase since Rentals.ca and Bullpen Consulting began publishing their report in 2018.

As the new report shows, the average one-bedroom apartment in Toronto now costs over $2,470. One and two-bedroom apartments in Canada's largest city now cost almost 30 percent more than they did a year ago.

Cheaper rents in Western Canada

The Rentals.ca report shows that the average rent for a one-bedroom was $2,474 in September. That's  a monthly increase of 6.3 percent and a 27.5 percent increase year-over-year.

As for two-bedrooms, which are quite popular with newcomer families, the average price in Toronto rose  2.9 percent between August and September, to $3,361. However the price has risen  27.7% on an annual basis.

But for newcomers and international students who choose to settle in secondary cities rental deals abound, particularly in cities in Western Canada.

A one-bedroom in Edmonton, Alberta rents for $1,073 - that's $1,401 cheaper than in Toronto! 

An increasing number of people requiring a place to live will turn to the rental market - Kevin Crigger, TRREB

And in Saskatoon, Saskatchewan a one-bedroom rents for $980, which is $1,610 less than the $2,590 price in Vancouver (which is No. 1 for highest rent prices).

Toronto Region Real Estate Board (TRREB) president  Kevin Crigger told Vrunda Bhatt of the Globe and Mail that rental market conditions are expected to tighten further in the coming months.

“Higher borrowing costs may have temporarily precluded home buying for some households, but the Greater Toronto Area (GTA) population continues to grow alongside a booming regional economy," said Crigger. "This means that an increasing number of people requiring a place to live will turn to the rental market."

Newcomers, international students help drive demand

In addition to rising interest rates and inflation, the continued arrival of large numbers of  newcomers to Canada and international students helps create a huge demand for rental properties, particularly in popular cities such as Vancouver, Toronto, Surrey and Brampton.

International students are an important part of Calgary's rental market for newcomers, according to Miguel Vasquez, a Digital Marketing Specialist for Mainstreet Equity Corp.

“With an average net rent of $1145, Calgary is the market with the highest demand for us. International students," Vasquez told Rentals for Newcomers. 

Canada is currently on track to meet or exceed its target of 431,645 new immigrants in 2022 which will certainly increase competition for rentals. 

According to recent data from Statistics Canada,  the amount of homeowners in Canada is growing at 8.4 percent, the renter population is growing at 21.5 percent.

And according to the most recent Immigration, Refugees and Citizenship Canada (IRCC) data, Canada’s immigration backlog remains at 2.6 million people.

Provincially, British Columbia had the highest average rent, coming in at $2,682 in September. The second-highest provincial rental rate was found in Nova Scotia. It rose to $2,453 in September, an increase of  35.5 percent from the year prior. Ontario was third at $2,451, up 18.4 percent.

The popular and large Gateway cities of  Vancouver and Toronto saw higher demand for smaller units in downtown locations which may indicate that more workers are returning to the office, either full-time or on a hybrid schedule. This has left more large units on the market in comparison to previous years. 

In Vancouver and Toronto, the average condo available for rent was 824 and 742 sq. ft respectively.

The Rentals.ca report however indicates that there may there some relief happening in terms of supply of rental units.

Referring to the slump in the housing market, the report notes that this may be leading would-be sellers to rent out their properties instead. This could be why “the total number of listings on Rentals.ca in September was the highest since Rentals.ca and Bullpen Consulting started this report in October 2018."

The report also noted that rental demand traditionally lessens seasonally in November through February.

This substantially exceeds normal seasonality and it's a stunning turn of events from demand growth we had seen for 8 consecutive months to begin 2022 - Max Steinman, Rentsync

As well, pageviews per listing on Rentals.ca have declined to roughly the average level seen between Q2 2022 and Q1 2022, before the Bank of Canada began raising interest rates. This is despite the site hosting its highest total number of listings since October 2018.

Citing their most recent rental industry  Demand Report, Max Steinman, chief executive officer of Rentsync, says they saw a sharp month-over-month decrease in renter demand in primary and secondary rental markets in September that included:

• 21 percent decline in secondary markets
• 17 percent in primary markets
• The most expensive large metro in Canada, Vancouver, dropped 30 percent
• Some markets fell as much as 39 percent month-over-month.

Typically," says Steinman, "we see some natural seasonal fall off from August to September but this substantially exceeds normal seasonality and it's a stunning turn of events from demand growth we had seen for 8 consecutive months to begin 2022."

Entering a period of reduced demand

Rentsync's monthly demand report shows that apartment demand is down for the first time in 2022 with September marking the end of the hottest year in leasing. The report says this "brings the Canadian rental market into a period of reduced demand and an overall softening of market conditions."

The Demand Report also notes that renters are fatigued by ongoing rent hikes and are likely staying in their units as opposed to moving. Rentsync anticipates a further decline in demand which will force landlords to become more proactive in order to remain competitive. 

What does this mean for newcomers arriving soon?

How this will play out for the waves of immigrants and international students arriving in Canada over the next few months remains to be seen. 

 "Immigrants and people moving from Ontario and places like Vancouver to Calgary and other cities where we have properties have kept us very busy," says Mainstreet's Vasquez. "It’s going to be very interesting to see how the demand shifts entering the yearly “slow” season, however, we are expecting to have high double-digit lead growth compared to previous years.”

Shaun Cathcart, chief economist for the Canadian Real Estate Association believes that the Canadian home-buying market is in the middle of a period of rapid adjustment due to rising interest rates, falling home sales, and inflation. He said that because of this there will be "even more pressure on rental markets" going forward.