How Are Recent Changes in the Ontario Real Estate Market Impacting Rentals?

In the first year or so of the coronavirus pandemic, the unthinkable happened: The rental market, from Toronto to Vancouver, collapsed. After years of meteoric growth for a typical one- or two-bedroom apartment in many of the major urban centres, the market cratered and tilted in favour of renters over landlords and property management firms. Indeed, there was a lot of reshuffling during this span, giving tenants an opportunity to find a better place and lock in lower rates amid price controls. There were many factors that led to the drop in rents throughout the Toronto rental market and the broader Ontario real estate market. For one thing, condominium units flooded the market due to families fleeing the major urban centres. The other factor was that certain jurisdictions prohibited using Airbnb and other short-term rental platforms. Now that the Canadian real estate market is a couple of years removed from the height of the COVID-19 public health crisis, conditions are normalizing, sending the cost for an average unit through the roof. H2 How Are Recent Changes in the Ontario Real Estate Market Impacting Rentals? According to a new study by Rentals.ca, the annual rate of rent growth in Canada was just under ten per cent in October, slowing from the 11.1 per cent year-over-year expansion in September. This represented the second-fastest annual gain over the last seven months. The average asking rents rose by 1.4 per cent month-over-month, down slightly from the 1.5 per cent print in September, amid seasonal factors. Overall, the average rent in Canada was $2,178 in October. British Columbia was the most expensive rental market in the country, as the average rent was $2,639. Here is a breakdown based on the residential property type: Apartment: +12.4 per cent to $2,065 Condominium: +8.6 per cent to $2,355 Townhome: +7 per cent to $2,376 But what is the rental housing situation in Ontario like? Unexpectedly, the Ontario housing market ranked the second highest in October, the report found. The average listed rent price was $2,492, up five per cent from the same time a year ago. The good news? “Ontario was the province with the slowest annual growth in apartment rents during October, posting a 4.6-per-cent increase (compared to a 6.6-per-cent increase reported for September). After decreasing by 0.4 per cent between August and September, average asking rents in Ontario edged up 0.2 per cent in October to reach $2,492,” the report stated. Here is a look at various Ontario rental housing markets based on one-bedroom units and year-over-year performance: Toronto: +1.4 per cent to $2,607 Oakville: +19.7 per cent to $2,524 Mississauga: +11.9 per cent to $2,352 Richmond Hill: +16.5 per cent to $2,326 Markham: +20 per cent to $2,325 Ottawa: +5.9 per cent to $2,056 Barrie: +0.6 per cent to $1,918 Hamilton: +9.5 per cent to $1,868 Oshawa: +9 per cent to $1,845 Windsor: +10.8 per cent to $1,545 Only a handful of rental markets recorded a year-over-year decline, including Niagara Falls (-6.3 per cent), Waterloo (-0.7 per cent), and Guelph (-1.2 per cent). So, what exactly is happening in the Ontario real estate market? While there are many variables, the main factor has been declining supply. This has been a common theme throughout the Ontario housing market, so it is not entirely shocking that inadequate stocks are ubiquitous in the Toronto real estate market. Demand throughout the Ontario rental market is intensifying, and it appears to be expanding beyond North America’s fourth-largest city. As interest rates start climbing and have climbed to their highest levels since before the global financial crisis, which has been slowing the broader Canadian real estate market, prospective homebuyers are delaying their purchases. Many households are waiting to see how much further residential properties could tumble after travelling in a downward direction in recent months. The Canadian government has reopened its borders, and Ottawa is looking to play a game of catch-up on the immigration front. The federal government aims to welcome approximately 1.2 million newcomers into the country over the next couple of years, with many arriving in the GTA. Students – domestic and foreign – have returned to in-person classes, so they will need to battle for limited units, too. This is the same for workers who are being forced to return to the office and perhaps find a place to live closer to work. “The typical seasonal increase in demand in the spring, coupled with renewed interest in more expensive downtown properties in Vancouver and Toronto, also contributed to the rise in rents nationally,” said Ben Myers, president of Bullpen Research & Consulting, in a June 2022 statement Indeed, with so many people returning to either the GTA or the rental market, there will be fierce competition comparable to what occurred in the home-buying process of the last two years. Looking ahead, there is no reason to suggest that price growth in the rental market will slow down any time soon, study authors warned. “Uncertainty in the ownership housing market and the delay in delivering new supply due to supply-chain delays and labour stoppages should continue to put upward pressure on rents into the fall of this year in the face of increased demand,” the Bullpen report stated. A year ago, many market analysts said it was time to brace for bidding wars for a bachelor apartment in the heart of Toronto. Well, not only has this battle begun, but it has extended to other parts of the Ontario real estate market.

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