Predicting 2023 rent increases by quarter:
In our 2022 rental recap report we noted that the prediction for rent increases in 2023 would be in the range of 3-6% across the board. Recent data pulled from Q1 2023, suggest that several major cities fell under that assumption with some of the largest rent increases occurring in Halifax (6.08%), Montreal (+5.79%), Waterloo (+5.5%), and Quebec City (4.7%). There were a few major markets which have decreased in Q1, such as Vancouver (-8.29%), Kitchener (-5.45%), Toronto (-3.03%) and Calgary (-2.22%). Although these markets were down, we predict that Q2 will see a steady growth in rent numbers across the board as there is a shift in moving habits during the warmer months to come.

The market has mixed signals on rent increases:

The rental market in the first quarter of 2023 has shown some mixed signals. On the one hand, prices in most markets appear to be slowly increasing since the last quarter of 2022 and the average days on market for listings has decreased, however there are still a few markets that haven’t recovered back to Q3 2022 rental prices (Toronto, Vancouver, Kitchener, Calgary).

Bank of Canada news affecting rental increases:

Many investors and landlords may have felt a calm wave with the latest Bank of Canada rate pause. The fear of having to plan for increasing rising mortgage rates (cost) seems to have slightly subsided and it has been reflected in the listing prices not gaining significant traction (growth still in the single digits across most major markets).

However, the demand for rental housing is still substantial as the days on market indicator tells us. We believe due to continually tight rental supply we are going to end up seeing prices rise once again in Q2 and beyond. We’re on our way out of the seasonally low phase of the rental market so more renters have already begun their search.

By the next quarter, if we don’t see a greater supply to meet demand, we expect to see more resurgence in rental rates across the board.

Cities to Watch / Halifax, Peterbrough, Kingston:

Halifax continues to exhibit strong demand with 1 bedroom rent up 13% since last quarter and 3 bedrooms up 6.1% with only 2 bedrooms seeing stabilization with 2.5% decrease. Halifax is a key location to watch as the city is putting forth interesting short-term rental regulations that are much more short-term rental friendly than other cities across the country. For example, instead of a blanket law that covers the entire city, they are planning zoning rules for commercial/mixed use and residential properties. If you are in a residential zone, you will be required to live in the home you intend to operate your short-term rental from. This is similar to places like Toronto, however, there is no 180 day restriction on the number of nights you can rent out for. 70% of the short-term rental listings are currently in residential areas so there may be a small reduction as some move back into the long-term rental space. However, just as in Toronto, when similar but more restrictive laws were passed on short-term rentals, the long term rental market will quickly absorb any new inventory and tight supply will continue to put pressure on price. How the city outlines zoning and the impact this will have on the valuation of homes will be interesting to watch. Peterborough and Kingston have been experiencing the lowest vacancy rates in Ontario as more families may be looking for more affordable towns that are not too far from Toronto. Peterborough’s purpose rental vacancy currently sits at 1.1% and Kingston is at 1.2% vacancy according to CHMC. Kingston saw rents rise across all segments with 2 bedrooms leading at 11.1% since last quarter. Peterborough had some stabilization but continued seeing rises in 1 bedroom rents with 2.9% increase. Both of these cities are university towns with a softened housing market but continually high rents which may be opportunities for investors looking to stay in Ontario.

Markets across the country are continuing to see high demand for rental properties – which means relatively low average days-on-market (DOM). Overall, from last month we saw days on market increase for most of the cities across the country showing signs of a definite slowdown in the rental market – however still showing very low days on market overall (with 20 DOM being the highest average number). Only 10 cities of the 38 saw declines in DOM. The biggest change for fast renter turnover was in London which saw listing DOM down 7 days sooner than last month. Montreal on the other hand saw listings sitting for 7 days longer. In Ontario, Niagara Falls, Mississauga and Peterborough led the country with just under 10 DOM at 7 days, 10 and 10 days respectively. Heading east, Halifax and Moncton saw listings quickly rented within 12 days. The two most expensive markets of Toronto and Vancouver both took an average of 15 DOM. In the prairies, Saskatoon and Winnipeg saw steady demand at 10 DOM. With most markets taking 2 weeks or less, rentals listings continue to see high demand and quick turnover.