Think house prices are too high? The rental market is even worse — with no relief in sight
CBC
While the dramatic impact of higher lending rates on the housing market has been well documented, what's happening in the rental market hasn't gotten nearly as much attention.
As anyone who has signed a lease — or tried to — lately can attest, rent is going up across Canada at an unprecedented pace.
According to data from rental accommodation website Rentals.ca and analyzed by data firm Urbanation, the average rent in October across Canada was $1,976. That's an increase of 11.9 per cent, well ahead of Canada's inflation rate of 6.9 per cent.
The increases aren't even across the country, either, as Atlantic Canada has seen rents rise at the eye-watering pace of 32.2 per cent in the past year. Ontario, British Columbia and Alberta have seen increases of 17.7 per cent, 15.1 per cent and 13.2 per cent, respectively.
Other regions experienced increases of slightly below the national average, but in just about every market across the country, tenants are facing a huge jump in the cost of keeping a roof over their head.
Calgarian Kellie Knight knows this all too well. She rents a two-bedroom unit in the city for $2,200 a month. That's a jump of about $500 compared with what she paid for a similar unit just before the pandemic. And it's bad enough that her rent now eats up about half her monthly income — far more than financial experts say is advisable.
"I was shocked how much prices had gone up and very quickly had to rearrange my budget to make today's rent work," she told CBC News in an interview. "When you're spending over half of your monthly pay on rent, you're not saving anything for a down payment."
Yet she was happy to sign up for a two-year lease recently to lock in that price, because it gave her a reprieve from the uncertainty she would have faced if she had to move.
"I moved here from Los Angeles, and if you had told me at that time that I would be paying L.A. rent prices in Calgary, I would have thought you were delusional," she said.
Normally, a slowing real estate market might be good news for renters, as landlords might be more eager to find good tenants. But that's not happening right now for a reason that Canadians have become very familiar with in the pandemic: supply and demand.
"Interest rates are actually working to elevate rent inflation because many people are not buying, so they are renting more," CIBC economist Benjamin Tal said.
People who would normally love to own are finding themselves priced out of the market by higher lending rates, which is causing them to either enter or stay in the rental market.
"Usually they would leave the rental market [and] be homeowners," Tal said. "But if they will not move out of their apartment, they will occupy the supply that is available ... that's like new demand."
When demand surges, it's often met by a corresponding increase in supply, but that's not happening right now because builders and owners are fearful of the risk.
