Canadian Renters Facing Record Highs: A Double-Edged Sword
Adrian C. Spitters, CFP®
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Source Article: Renting a home in Canada has never been more expensive
Rising Rents Strain Canadian Renters
Canadian renters are experiencing the highest asking rents on record. Nationwide, average rents increased by 9.3% in May compared to a year earlier, continuing a trend seen over the past three years. RBC economist Carrie Freestone highlighted that renters, who generally pay a larger share of their income on housing than homeowners, are at risk of falling behind in long-term wealth accumulation. This is especially concerning for those with lower incomes.
New data from Urbanation & Rentals.ca show the average rent reached $2,202 last month, the first time it has surpassed the $2,200 mark. While rents have increased by an average of 9.1% since 2022, the pandemic years saw a decline, making the five-year average increase 4.7%.
Detailed Breakdown of Rent Increases
Renting an apartment has seen the largest increase, with a nearly 14% year-over-year rise. Purpose-built rental apartments increased by 13.7% from a year ago, outpacing the 3.4% annual growth in condo rents. Interestingly, condo studios saw a slight annual decrease in average rent by 0.7% to $1,856.
The cities with the highest rent increases are not necessarily the most expensive markets overall. For example, Regina, Saskatchewan, saw a nearly 17% rise in one-bedroom unit rents, bringing the average to $1,259, one of the lowest among 35 markets surveyed. In contrast, Vancouver's average rent for a one-bedroom unit decreased by almost 6% year-over-year but remains the most expensive at $2,671. Niagara Falls saw the largest decrease, with a 9% drop in average rent for a one-bedroom unit, now at $1,616.
Investor Opportunities in Purpose-Built Rentals
Despite challenges in the real estate market, purpose-built rental developments present promising opportunities. Investors and developers are eyeing long-term returns from these projects, which cater to evolving renter demands with modern amenities. Increasing the supply of purpose-built rentals can help improve affordability and provide more options across different price points and locations.
The Impact of Immigration on Rental Demand
One significant factor contributing to the rising rents is the massive immigration in recent years. As more people move to Canada, the demand for rental housing has surged, leading to higher rents. This trend creates a favourable environment for investors in the rental market. With high demand and limited supply, purpose-built rentals become an attractive investment, offering stable returns.
Rental Investment: A Stepping Stone for Prospective Homebuyers
For young adults aspiring to become homeowners, the rental market can serve as a strategic stepping stone. With an initial investment as low as $2,508, individuals can enter the real estate market through multifamily rental apartments. This approach allows them to benefit from property appreciation and generate rental income, contributing to savings for a future down payment.
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