A Royal LePage survey reveals rising rents and affordability challenges in Canada's major rental markets
One third of Canadians live in rental accommodations, and this figure has been gradually increasing in recent years due to affordability challenges in the resale market.
According to a recent Royal LePage survey conducted by Hill & Knowlton, 27 percent of Canadians who currently rent plan to purchase a property in the next two years. Among those aged 18 to 34, that figure jumps to 40 percent.
Meanwhile, 69 percent of renters do not plan to buy a home soon, with more than half (54 percent) citing insufficient income to afford a property in their desired area (61 percent among respondents aged 18 to 34).
Phil Soper, president and CEO of Royal LePage, stated, “The rental sector is not immune to the significant affordability challenges stemming from Canada's acute housing shortage. High mortgage rates have made it difficult for many to purchase a home, forcing some to move into, or remain longer than planned, in the rental market.”
Despite a temporary decline in rental demand during the height of the COVID-19 pandemic, the supply of rental properties in most major markets remains extremely low.
Among renters planning to buy within the next two years, half (50 percent) expect to have a down payment of less than 20 percent, 26 percent plan to put 20 percent down, and 15 percent expect to have a down payment of more than 20 percent.
In Canada, mortgage insurance is required for homes purchased with less than 20 percent down.
To accumulate their down payment, 53 percent of respondents plan to use savings. Additionally, 46 percent will take advantage of the First Home Savings Account (FHSA), and 29 percent will draw on their RRSPs using the Home Buyer's Plan (HBP).
Furthermore, 25 percent will use a financial gift from family or an inheritance. Respondents could select more than one option.
Forty-four percent of renters planning to purchase believe they will afford a home in their current city of residence, while 37 percent do not.
Among those who don't believe they can buy in their current location, 40 percent say they will need to move more than 50 kilometres to find an affordable property, 21 percent will look within a 31–50-kilometre radius, and 18 percent within a 16–30-kilometre radius.
Only 9 percent are confident they could buy within 15 kilometres of their current location.
The Royal LePage 2024 Most Affordable Canadian Cities Report shows that 50 percent of people living in the greater regions of Toronto, Montreal, and Vancouver would consider relocating to a more affordable city if they could find a job or work remotely.
Among renters in these regions, 60 percent are willing to relocate, while 45 percent of current homeowners would consider it.
Soper noted, “We know that Canadians widely consider home ownership a worthwhile long-term investment and a quintessential part of the Canadian dream. Many are willing to relocate to achieve this, especially young Canadians, and those with remote work flexibility.”
Before signing or renewing their current lease, 29 percent of Canadian renters considered purchasing a property. Among them, 41 percent said the lack of a sufficient down payment led to their decision to rent instead.
When asked why they continue renting rather than buying, about one third said they are waiting for interest rates (33 percent) and property prices (30 percent) to decrease. Twenty-two percent are saving for a down payment, and 20 percent did not qualify for a mortgage. Respondents could select more than one answer.
Soper added, “The Bank of Canada's recent rate cut, the first in over four years, will lower the threshold to qualify for a mortgage, helping renters become owners. However, increased competition as they enter the market will put additional pressure on property values.”
Rising Rents and Low Vacancy Rates
Nearly four in ten Canadian renters (36 percent) spend up to 30 percent of their net income on rent. Meanwhile, 37 percent spend between 31 and 50 percent of their income on rent, and 16 percent spend more than 50 percent.
In Vancouver and Toronto, 27 percent, and 19 percent of renters, respectively, spend more than half of their income on rent. This figure drops to 10 percent in Montreal.
The Canadian Mortgage and Housing Corporation (CMHC) reports that the average rent nationally for a two-bedroom unit in October 2023 was 8.0 percent higher than a year prior. Vacancy rates were 1.5 percent for purpose-built rental buildings and 0.9 percent for condominium apartments.
Soper concluded, “From coast to coast, Canadians struggle with housing affordability due to high interest rates and limited rental supply. The housing industry and government must collaborate on solutions to increase inventory, including rentals, and support those most impacted by these market conditions.”
The 2024 federal budget, released on April 16th, includes measures to protect tenants and strengthen their path to buying real estate.
This includes incentivizing purpose-built rental buildings and introducing the Canadian Renters' Bill of Rights, which proposes a national standardized lease agreement and disclosure of a property's rental price history.
It also recommends allowing tenants to report their rental payment history to credit bureaus to improve their credit scores, thereby strengthening their future mortgage applications.
Atlantic Canada
In Atlantic Canada, 28 percent of renters considered buying a property before signing or renewing their lease. Looking ahead, 22 percent plan to purchase a property in the next two years, while 59 percent will not.
The average rent in Halifax for a two-bedroom unit in October 2023 was 11.0 percent higher than a year prior, with a vacancy rate of one percent for purpose-built rental buildings.
Quebec
In Quebec, 28 percent of renters considered buying a property before signing or renewing their lease. Among them, 42 percent are waiting for property prices to decrease, and 41 percent are waiting for interest rates to go down.
The average rent in Montreal for a two-bedroom unit in October 2023 was 7.9 percent higher than a year prior, with vacancy rates of 1.5 percent for purpose-built rental buildings and 1.3 percent for condominium apartments.
Ontario
In Ontario, 30 percent of renters considered buying a property before signing or renewing their lease. Among them, 47 percent cited the lack of a sufficient down payment, and 28 percent are waiting for property prices to decrease.
The average rent in Toronto for a two-bedroom unit in October 2023 was 8.7 percent higher than a year prior, with vacancy rates of 1.5 percent for purpose-built rental buildings and 0.7 percent for condominium apartments.
Manitoba and Saskatchewan
In Manitoba and Saskatchewan, 44 percent of renters considered buying a property before signing or renewing their lease. Looking ahead, 36 percent plan to purchase a property in the next two years, while 34 percent will not.
The average rent in Winnipeg for a two-bedroom unit in October 2023 was 4.4 percent higher than a year prior, with vacancy rates of 1.8 percent for both purpose-built rental buildings and condominium apartments.
Alberta
In Alberta, nearly a third of renters (29 percent) considered buying a property before signing or renewing their lease. Looking ahead, 27 percent plan to purchase a property in the next two years, while 45 percent will not.
The average rent in Calgary for a two-bedroom unit in October 2023 was 14.3 percent higher than a year prior, with vacancy rates of 1.4 percent for purpose-built rental buildings and 1.0 percent for condominium apartments.
British Columbia
In British Columbia, 26 percent of renters considered buying a property before signing or renewing their lease. Looking ahead, 27 percent plan to purchase a property in the next two years, while 52 percent will not.
The average rent in Vancouver for a two-bedroom unit in October 2023 was 8.6 percent higher than a year prior, with vacancy rates of 0.9 percent for both purpose-built rental buildings and condominium apartments.
