By Ketki Saxena
Investing.com – A report from the Canadian Mortgage and Housing Corporation revealed that Canadian rents increased at a record pace in 2022, making housing more unaffordable for renters and homeowners alike as interest rate.
Between 2021 and 2022, rents across Canada rose 5.6% climbing from $1,771 to $1,930 for a benchmark 2 bedroom apartment.
Rents rose significantly more for two-bedroom units that turned over to new tenants, at 18.3%, while rents for tenants renewing their leases rose 2.9 %.
And that is of course just the average. In Toronto - which saw the highest pace of rent increases - rents on two bedroom units with new tenants increased 29.1%, while tenants renewing leases saw a 2.3% increase.
Halifax saw the next highest increase - 28.9% for new tenants, and 4.5% for tenants renewing leases.
Vancouver residents saw rents climb 23.9% for new tenants, and 3.9% for tenants renewing leases.
The Kitchener Waterloo region, Hamilton, and Windsor all saw rents for new tenants climb 25%.
What’s behind the sharp increases in rent across the country? The CMHC report points to multiple factors, including low vacancy rates for condominiums, growing demand from students and immigrants that far and fast outstrips supply increases, and increased pressures on the rental market from prospective homeowners as higher mortgage rates decrease the affordability of homeownership.
“Lower vacancy rates and rising rents were a common theme across Canada in 2022", as per the report.
The national vacancy rate for purpose-built rental apartments - which “play a significant role in the supply of rental housing,” - dropped to 1.9% in 2022 from 3.1% a year earlier. Vacancies are now at the lowest recorded since 2001, which combined with low inventory of housing adds to supply pressures.
Meanwhile, demand for rentals continues to soar, in part due to a robust influx of immigrants who have a “high tendency to rent”, and students returning to campuses in September 2022 after two years of remote learning during the pandemic.
At the same time, interest rates on mortgage rates have soared, now at 6.7% from all of Canada’s big six banks - compared to around 2% at the beginning of 2022.
“The tightness of both the rental condominium and purpose-built rental markets therefore had a common driver: the outpacing of strong supply growth by even stronger demand growth,” as per the report.
“The current conditions reinforce the urgent need to accelerate housing supply and address supply gaps to improve housing affordability for Canadians.”