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A Canadian real estate expert believes renters will see little benefit to changes in Canada’s interest rates, even as rental prices across the country see sky-high increases.
A report from Rentals.ca and Urbanation, released on Monday, found the average asking price for a rental in December climbed 8.6 per cent year-over-year, to a record $2,178 per month.
Additionally, asking prices for a one-bedroom unit climbed 12.7 per cent on an annual basis to $1,932.
“When you look at the last two-year period, rents have grown by about 22 per cent,” Shaun Hildebrand, president of Urbanation, told BNN Bloomberg in a television interview on Tuesday. “This just speaks to how strong rental demand is across the country right now.”
“This is obviously much faster than income growth and it’s causing a real deterioration of rental affordability across the country.”
While many economists believe rental prices could stabilize once the Bank of Canada brings interest rates down – expected later this year -- Hildebrand isn’t so convinced.
“We’ve been underbuilding rental housing for decades, so there’s not going to be a whole lot of change, unfortunately,” he said.
Hildebrand said lower interest rates may push renters into homeownership and other measures, such as the cap on foreign students, may help with rental supply. However, he added the overall impact of the measures will be muted.
“That should take a little bit of steam out of the market, but still we’re expecting to see rent growth in the five per cent range for the country, which is bringing things back in line with the five-year average,” he said.
Hildebrand pointed to three factors hurting rental prices in the country: record population growth, soft real estate activity and a stable economy.
RENT HIKES SEEN OUTSIDE OF TORONTO, VANCOUVER
While rent prices saw increases of nearly 10 per cent nationally, Canada’s two biggest cities, Toronto and Vancouver, actually saw rent prices decline.
Vancouver saw average rent decline by 5.8 per cent in December compared to a month prior, while Toronto’s declined by 2.8 per cent in the same time frame.
Meanwhile, cities that saw significant population growth, such as Calgary and Halifax, took the brunt of the rent price hikes.
“I think this speaks to some resistance in the market to how expensive rents have become and there’s been some outward migration from these big expensive cities into relatively more affordable markets,” Hildebrand said.
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