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The Bank of Canada’s decision to hold interest rates at five per cent will likely keep the country’s real estate market on pause, but tenants – particularly those in non-rent controlled buildings – are at a disadvantage amid high costs, experts say.
Tenants have felt the brunt of rising rent costs as landlords respond to higher interest rates and related rising mortgage costs.
Canada’s central bank elected to hold rates at five per cent again on Wednesday, and noted the upward pressure on housing costs related to its historic hiking cycle in its statement on the rate decision.
“Shelter price inflation has picked up, reflecting faster growth in rent and other housing costs along with the continued contribution from elevated mortgage interest costs,” the central bank’s official statement read.
TENANTS SHOULD CONSIDER RENT CONTROL: REALTOR
Wednesday’s central bank decision to keep rates on pause should keep the market steady, said Nicki Skinner, realtor at Bosley Real Estate. But she cautioned that tenants might be susceptible to further rent increases, depending on the details of their rental agreement.
“Steady rates are good news for landlords and tenants, but it really depends on if the property is rent controlled,” Skinner told BNNBloomberg.ca in a phone interview.
In Ontario, landlords can only raise rents to a maximum of 2.5 per cent each year for rent-controlled properties. But that limit doesn’t apply to tenants in buildings that began housing tenants after Nov. 15, 2018, or if a new tenant is moving into a unit.
“An extended period of interest rates at these levels could cause some landlords to hike rents if they are feeling the financial pressure,” Skinner said.
She recommended that tenants find out if a unit is rent controlled if they are looking to move in a high-rate environment.
‘NOT GREAT’ FOR RENTERS
Another housing expert noted that Canadian renters face a bleak picture when it comes to overall affordability.
“The situation is still not great for renters,” Victor Tran, mortgage and real estate expert with RATESDOTCA, told BNNBloomberg.ca in a written statement.
Real estate investors facing higher mortgage rates are likely to keep passing those extra costs onto their tenants, Tran explained. He also highlighted a lack of rental supply in the market and that is putting pressure on costs in housing a market that was already pricey to begin with.
“Even before the overnight rate began to rise, rents were expensive,” he said. “It’s unlikely that renters will see relief from high rental costs anytime soon.”