No Rent Price Relief in Sight for Newcomers to Canada and International Students
As thousands of newcomers and international students arrive in Canada every month looking for rental accommodation, rent prices continue to rise, a trend that experts predict likely won't change anytime this year.
The most recent National Rent Report from Rentals.ca showed that asking rents in Canada increased 9.7 percent year-over-year to an average of $1,984 in February.
According to the report, which is analyzed by Urbanation, the annual rate of rent inflation has been moderating since reaching a high of 12.4 percent in November.
Rents decreased 0.6 percent from January 2023, the third consecutive monthly decline, and decreased by a cumulative 2.0 percent over the past three months, a sign of "some softening" in the market caused by reduced affordability in the rental market, a recent improvement in home-buying demand, and an increase in new supply from apartment completions, says the report.
But the forecast is for more price hikes.
“I don’t see it (rent prices) becoming less expensive,” Urbanation president Shaun Hildebrand told Victoria Gibson of the Toronto Star.
Asking rents to rise across the GTA
Hildebrand said, for example, that he still expects about a five percent rise in asking rents across the GTA in 2023.
Though future rent increases may be more moderate as the year progresses, Urbanation predicts steady rent increases throughout 2023, primarily due to the influx of newcomers and aspiring homeowners being unable to enter the homeownership market, despite falling prices and sales.
Canada's ambitious immigration targets are definitely fuelling rental demand and competition for available rental accommodation.
Canada plans to welcome 465,000 new immigrants this year after admitting a record-breaking 431,000 newcomers in 2022, mainly from India, the Philippines and China.
The country hopes to land 485,000 newcomers in 2024 and 500,000 in 2025. Canada has also welcomed a record number of international students, with those numbers continuing to rise.
Much cheaper rents in the Prairies
Right now, a one-bedroom apartment in Toronto rents for $2,501, while a one-bedroom in Saskatoon costs $1,063 monthly. That's a difference of $1,438.
According to Urbanation, the current average price of a one-bedroom listing in Toronto requires earnings of at least $100,000 to be considered affordable.
To afford the average two-bedroom Toronto apartment, a household needs to earn $130,000 per year, according to the Urbanation report.
Vancouver and Toronto, the two gateway cities popular with newcomers and international students, remain the two most expensive rental markets in Canada.
Regina and Grande Prairie are the two cheapest, according to the report. Eight of the 10 cheapest cities for rent prices are found on the Prairies (Manitoba, Saskatchewan and Alberta).
Calgary rents are rising
However, according to the report, among Canada’s largest markets, asking rents increased the fastest in Calgary over the past three months, rising 3.8 percent and over 12 months, rising 28.1 percent, hitting an average price of $1,862 in February.
The bank pausing rates will push people back into the housing market and alleviate some pressure off the rental market - Jon Pasalis
Calgary rents, however, are still below the national average, with one-bedrooms averaging $1,652, two-bedrooms averaging $2,035, and three-bedrooms averaging $2,370.
"Finding affordable housing is harder now than ever before," Rentsync's David Aisikov told Rentals for Newcomers, "but that shouldn't discourage those who are looking to move. There are plenty of more affordable places to call home clear across Canada, and with the modern connected world, you can find opportunities everywhere."
For immigrants and students arriving in Canada later this year, some experts see rent price relief on the horizon.
Speaking to Iva Poshnjari of BNN Bloomberg, John Pasalis, president of Realosophy Realty, said that the recent decision by the Bank of Canada to keep the interest at 4.50 percent could "take some pressure off" the red-hot Canadian rental market.
Canada's central bank recently paused interest rate increases after eight straight hikes.
Rent stabilization may come later this year
Some analysts say that the "pause" could entice would-be homebuyers who, until now, were sitting on the sidelines, to enter the resale home market, thus cooling the demand for rental accommodation.
“The bank pausing rates will push people back into the housing market and alleviate some pressure off the rental market that should cause prices to plateau,” John Pasalis told Poshnjari.
Pasalis predicted that it’s likely Canada will see stabilization in rent costs for the second half of 2023 as rents either flatten or slow.
Seasonal decline in renter demand will end
Aizikov, product manager for Rentsync, observes that "following January’s sudden surge in rental demand, February showed substantial declines in overall rental demand along with property counts.
Writing in Rentsync's most recent Canadian National Demand Report, Aizikov assures landlords that: "this is not a sign of concern ... the previous three years of data suggest that the seasonal decline in renter demand extends through February, with March representing the first month of renewed renter interest."
The rental market will continue to tighten
Rental property owners and managers across the country, says Aizikov, can be confident that they will continue to see strong leasing due to the basic imbalance between the available supply of rentals and the demand posed by a growing population of renters (newcomers and students) across the country.
"The constant and growing demand for apartments across Canada, especially in major markets, limits the potential for rents to come down significantly in the near future," Aisikov told RFN. "Even when demand cools because we have such a deep imbalance between the demand for units and the supply of new units coming to market, we aren't likely to see any real relief in the short term."
Aizikov explained that the "only form of relief we can expect to see would come in the form of a significant amount of new construction which, if brought to market quickly enough, would have the effect of lowering rents."
The search for housing in Canada is more difficult than ever - Dave Frattini, Prepare for Canada
The continuing highly competitive rental market in Canada reinforces the need for newcomers and international students to begin their research about the housing market well before they land in Canada, advises Dave Frattini, managing partner of Prepare for Canada and Rentals for Newcomers.
Newcomers need to research before they arrive
"Vacancy rates in most cities across Canada are now hovering around 2 percent," said Frattini, "meaning landlords have all the power in choosing the tenant they want. For newcomers, this means the search for housing in Canada is more difficult than ever."
Frattini said newcomers should prepare themselves by:
- understanding the type of accommodation that they're looking for
- understanding the reality of what rental prices genuinely are in the city where they plan to settle
- having all of their documents as they're meeting potential landlords
- understanding that selling yourself as a potential tenant will be critically important.
"Our sites (Prepareforcanada.com and Rentalsfornewcomers.com) are filled with great tips, tools and resources that can help you get ready for your search. Be prepared and know your search will require dedication and time, so budget accordingly for both."
*No AI-Generated content was used in the writing of this story, and all sources are cited and credited where possible
