It looks like we can all expect our rent to go up this year, especially if you're looking at a new rental. Canadians can expect to see on average a 6% increase in rental prices this year, according to a study done by Rentals.ca.
Unaffordable housing and high interest rates alongside low vacancy rates have all contributed to the nationwide increases expected for 2019.
TL;DR Low vacancy, high interest rates, and the inability to afford a home are all contributing to this year's nationwide increase in rental prices.
Why is housing in/around Calgary so goddamn expensive. Like, if you can afford 8 g's per month on rent, PLUS utilities, I think you can afford to buy your own place.— Katie (@Alberta_Cowgirl) December 28, 2018
While Montrealers can breathe a little easier knowing their predicted increase is only 1%, Ontarians can expect an 11% increase in Toronto, 10% in Mississauga, and 9% in Ottawa.
Vancouver is expected to see a 7% increase and Calgary 4%, meaning the already ridiculous prices in Vancouver aren't expected to drop any time soon.
These increases are likely due to the higher interest rates that are making homes difficult to finance for new buyers. That, on top of already steep home prices, makes the ability to move out of a rental nearly impossible.
Due to these market conditions, many young families are postponing their first property purchase, pushing the cost of a 2-bedroom rental up as high as $2,600 a month in cities like Toronto.
There are other factors that are making the transition into homeownership difficult, too — things like hikes in interest rates and the tightening of mortgage rules. Last year the mortgage rate increased three times.
Why is rent in Toronto so expensive? 😖— 👽🖤 (@nuka_c0la) January 4, 2019
Many Canadians are also required to undergo a stress test before being approved for a mortgage. Mortgage stress tests exist to ensure that Canadians could survive financially if interest rates shot up unexpectedly.
There are also more people looking for rental accommodations, according to Matt Danison, CEO of Rentals.ca.
These people include new immigrants, who almost always rent upon arrival to Canada, as well as young Canadians.
Because Canada is seeing a record low unemployment rate, we know the job market is healthy and young Canadians are finding work out of post-secondary school. This means fewer grads moving back home to mom and dad after graduation.
Not really. To rent a 3 bedroom home in #vancouver can be over $3000 which is about the same as a mortgage on a $700k condo in a good 90's building with a 10% downpayment. That is not saying that is affordable by any means, but it does say that simply renting is not an answer.— Robert Billard (@robert_billard) December 30, 2018
Instead, young Canadians are looking to rent their own place, which means more occupied rentals. When vacancies are low, prices can increase, that's just simple supply and demand.
The extra trouble comes when there is no new supply to offset the high demand. While we see infrastructures being built (hi, condo-ville Toronto, I'm looking at you) many of these properties are not complete, thus no new rentals available.