Rising inflation is forcing Canadians to face rising cost of living as food and gas prices are on the rise. But for those who rent their homes, rising inflation is also likely to cause rental prices to rise in the coming months, experts say.
Moshe Lander, a professor of economics at Concordia University in Montreal, said Canadians can expect to see an increase in the rate of inflation in the near future, as well as rising rental prices.
“Rent is one of those things that, because it’s essential, will usually increase,” Lander told CTVNews.ca in a telephone interview on Wednesday. “It is perfectly reasonable that if you are a tenant, you should expect a large increase in rent in the next six to 12 months if your rent is restored.
“I feel like we haven’t seen the worst yet.”
Tenants aren’t the only ones feeling the pinch of rising inflation rates, so are landlords, Lander said. As a result, they are likely to turn to their tenants in search of a way to recoup these additional costs, and other expenses such as renovations, raising the price of rent, he said.
“We’re all suffering from inflation; homeowners aren’t immune to that,” Lander said. “Where could I go? [my] company and say, “You have to give me a bigger boost to stay up to date.” [inflation]the landlords go … go to the tenants and tell them, “I’m increasing your rent.”
In June last year, the annual inflation rate reached 3.1 percent, a decrease from the rate recorded just a month earlier. However, since then, Canada’s inflation rate has risen steadily from month to month before reaching a 31-year high of 6.8 per cent in April this year.
Average rental prices in Canada have also risen for several months before reaching a three-year high last month, according to data collected by Rentals.ca. In its latest rental report, the average rental price of Canadian properties was $ 1,888 per month in May 2022. Month-on-month, this is an increase of 3.7%, the largest increase since May 2019. Properties include single-family homes and flats. semi-detached houses, semi-detached houses and apartments.
“Rents are already rising in many of Canada’s major markets,” Paul Danison, director of content for Rentals.ca, told CTVNews.ca on Wednesday in a telephone interview. “But now you’re adding to the rising interest rates [and] inflation is going out of control and rents are going through the roof right now. “
According to Danison, “there is no doubt” that rising inflation is playing a key role in raising average rental prices across the country. Major markets, in particular, are experiencing drastic price growth year after year. In Vancouver, starting this month, the average rental price for a one-bedroom unit is $ 2,377 a month, up 19.9 percent year-on-year. Toronto also saw rental prices skyrocket between 2021 and 2022: the average rental price for a one-bedroom unit in the city is $ 2,133 a month, up 15.7% from the previous year. previous year. Halifax residents also experienced a significant increase in the average rental price, with a one-bedroom unit costing $ 1,669 a month, up 13.4% from the same time last year. .
Some other smaller markets are also experiencing large increases, Danison said, as residents able to work from home appear to be moving further away from urban centers. In Burnaby, BC, the average rental price is now $ 2,012 a month for a one-bedroom unit, up 24.1% year-on-year. Tenants in Kitchener, Ont. they are seeing similar growth levels, with the average monthly price of a one-bedroom unit now at $ 1,839, up 22.4% year-on-year.
Rising interest rates, said John Pasalis, president of Realosophy Realty, a Toronto-based real estate broker. Recent interest rate hikes set by the Bank of Canada are contributing to a slowdown in the resale housing market, leading to fewer home sales, he said. Many first-time homeowners now choose to stay in the rental market instead of buying a new home.
“Interest rates are making it very difficult for new buyers to enter the market,” Pasalis told CTVNews.ca in a telephone interview on Thursday. “Many of these people will move to the rental market, which will drive up rental prices, unfortunately.”
“It’s been a very difficult market for tenants right now because there’s a lot of competition.”
Given each of these factors, Danison said he expects rental prices in Canada to continue to rise at a similar rate during the fall season.
“When you see inflation rates like this, and you see interest rates go up, and you see a growing supply and demand, it’s hard for rents to keep going up,” Danison said. “I guess the monthly rate will jump back to a pretty significant number.”
CAN RENTS EXPECT PRICES TO LOWER AGAIN THIS YEAR?
Despite what is likely to be an increase in inflation rates in the short term, Lander said he expects the rate to pick up and slow by the end of the year. This is due to the rising interest rates that Canadians have seen in recent months. While the Central Bank of Canada has said the goal of raising interest rates is to cool inflation, it may be months before the effect of those rises begins to materialize, Lander said.
“If the first interest rate hike was in February, I would look to August, saying, ‘Okay, I’m starting to see signs that the rate hike, which was only 25 basis points, is starting to have effect? ”Lander said. at its original level “.
However, a downward trend in inflation does not necessarily mean that rental prices will also fall, Lander said. A more likely outcome would be to see rental prices rise at a slower pace compared to how quickly they have risen in recent months, he said.
“They will keep going up … The rent is always going up, it’s very rare for the rent to go down,” Lander said. “It’s just that the speed at which your rent increases won’t be as fast as it is being restarted now.”
Ideally, Canadians will see the rental market turn around in 2023, Danison said.
“Growth will have to slow down at some point,” he said. “But I don’t see rents going down before the end of the year.”
WHAT OPTIONS DO RENTERS HAVE?
In the medium to long term, a key factor to consider when determining how quickly rental prices will rise is the amount of supply in the rental market, Lander said. If demand continues to outstrip supply, as is now the case, the lack of available housing for tenants will increase rental prices, he said.
The solution is for municipalities to put in place ordinances that encourage housing construction and eliminate some of the bureaucracy surrounding zoning restrictions, he said, instead of waiting for regional or national governments to intervene, he said. to say.
“Almost all housing problems are municipal, and in part that’s why the federal and provincial governments have such a hard time dealing with these kinds of problems,” Lander said. “I think the average tenant is looking for the wrong place.”
Apart from that, Pasalis said he encourages those who want to enter the rental market to take into account the existing rental control guidelines. Each province in Canada has its own set of policies designed to protect tenants by limiting the frequency of rent increases, as well as the amounts by which prices can rise.
In British Columbia, for example, landlords must notify their tenants at least three months in advance of any rent increase. Price increases can only occur once a year, and are based on the current rate of inflation. Other provinces have similar guidelines. In Ontario, landlords may not increase rental prices until 12 months after the start of the rental or 12 months after the most recent rental increase. A price increase is also calculated using the province’s consumer price index.
“Each province will have its own rent and rent control guidelines, and some will be stricter than others,” Pasalis said.
Danison said he advises tenants to renew their existing leases whenever possible, rather than signing new agreements with other landlords.
“When you have to move, you may be talking about hundreds of dollars more a month to find a place similar to the one you live in right now,” he said.
Danison’s advice also includes investigating possible new homes as soon as possible, even months before a lease expires. He also points out a number of benefits that are offered to tenants, such as free rental for one month, free TV and internet service for one year, and free parking.
“Talk to your friends, talk to leasing agents [and] “Let people know you’re looking for a place,” he said. “There are offers to make if you’re creative.”