Lawmakers across Canada have put a renewed focus on making housing more affordable, but experts predict chronic issues around pricing and supply will keep straining the country’s rental market in 2024.
“I don't see things getting better in the short term,” Steve Pomeroy, senior research fellow for the Centre for Urban Research and Education at Carleton University, told BNNBloomberg.ca in an interview.
Pomeroy expects a recent uptick in rental construction will partially alleviate the supply shortage in Canada, but he said it will take some time for renters to see meaningful relief.
“We've actually significantly increased our game in terms of adding new rental supply,” Pomeroy said, noting that the pace of rental construction has picked up in Canada in recent years.
“But it's a lag issue,” he continued. “It's going to take a bunch of years … to catch up, and if we don't suppress demand in the short term, we're going to continue to have short-term pressures.”
‘A SLOWER YEAR FOR RENT INCREASES’
Shaun Hildebrand, president of real estate consulting firm Urbanation, told BNNBloomberg.ca that rent prices in Canada will likely remain elevated next year, but he expects price growth to be slower.
“It'll be a slower year for rent increases, particularly in the more expensive markets,” he said in an interview.
Urbanation’s latest monthly rent report found that the average asking price for a rental unit in Canada was $2,174 in November, relatively flat from the previous month but an 8.4 per cent increase year-over-year.
It also found the annual rate of rent growth in Canada has been slowing, following year-over-year increases of 9.9 per cent in October and 11.1 per cent in September.
Hildebrand noted that average rent prices in Toronto and Vancouver decreased towards the end of 2023, due in part to seasonal demand changes, as rent prices tend to decline in the late fall and winter.
Renters may still take advantage of the cooling trend in the early months of 2024, he said.
“If you are a renter that's looking for a unit in Toronto or perhaps Vancouver, the next few months would be quite favorable to do so, but the structural supply deficit in these markets is still very acute,” he said.
A decline in inflation in 2024 and potential interest rate cuts could take some pressure off rent prices in 2024 as first-time homebuyers move into the ownership market, Hildebrand said. However, he cautioned that home prices will likely remain prohibitive for many Canadians.
Despite the ongoing challenges faced by Canadian renters, Hildebrand said he expects the record price growth seen in the rental market to “move into the mid-to-lower single digits” at the outset of 2024.
The federal government announced in September that it would waive GST on new rental projects in an effort to encourage new developments.
Ontario, the province with the most renters in the country, followed suit in November, announcing the removal of their portion of the HST on new rental builds.
Developers have welcomed the changes but highlighted more work that must be done to add supply to the market.
Giacomo Ladas with rentals site rentals.ca said the tax measures have made rental construction more economically viable for developers, though many challenges remain.
“It’s a really good first step, but there are still so many hurdles that I've talked to developers about that slow down the construction of these new apartments,” Ladas told BNNBloomberg.ca in a phone interview.
“It could take six or eight months, I was told by some developers, to negotiate what colour to paint the facade of their building … there's so many hurdles for them to actually get something built.”
Pomeroy and other experts have made the case that record immigration numbers have contributed to the post-pandemic rental supply shortage that has driven up rent prices in turn.
Canada has seen significant increases in its non-permanent resident population, many of them temporary foreign workers and international students.
“Those are the folks who rent,” Pomeroy said.
“The immigration policy or the lack of management of immigration, particularly temporary immigration, I think was the key driver in excess demand. It's not so much that we had a chronic problem of under supply, we had an instant issue of surging excess demand.”
The federal government has tabled plans to level out the number of new permanent residents to Canada in 2026, and doubled the income requirement for foreign students who wish to study in Canada.
But Pomeroy said that in 2024, he doesn’t see those measures “massively ratcheting back” the number of international students or foreign workers coming to Canada.
“In the absence of very aggressive action on reducing that number, then that pressure is not going to go away,” he said.
Courtesy BNN Bloomberg with files from the Canadian Press.