Rent stabilization for the winter months:
Continuing from our rent report in November 2022, rent stabilization is occurring with the month over month declines across the majority of markets in Canada. Monthly rent is down 5.48% vs. November 2022. However the rent is up approximately 18% vs. November 2021. Rent stabilization, in combination with the new affordability standards in Canada puts investors and landlords in a levelling out period.

Affordability standards have changed:
The age-old rule of a family not spending more than 30% of their household income on rent will be changed, as the average family in Canada will now spend over 35% (down from 36% in Oct 2022) of their income on rent, with that number rising upwards of 45% plus of their income within hot rental markets in the country such as Vancouver, Victoria, Kelowna, and Toronto.

The average median rent amount across Canada was $2,140/month, with Ontario ($2,400), British Columbia ($2,400), and Yukon ($2,150) coming in as the top 3 provinces.

The more affordable cities for families in Ontario include Sault Ste. Marie, Sudbury, Windsor all being under 35% of household income, while others like Ottawa, Kingston, London, Brantford, Belleville, Guelph and Hamilton are still on the affordable end for families, with rent under 45% of household income.

What to expect for the rest of the year:
Rent declines could be the normal seasonal pattern as prices tend to decline in the winter months and stay that way until at least after the holidays. However, further interest rate hikes, combined with continuing inflation, will continue to keep the pressure on renters as more mortgages come up for renewal with less buying power available. In our Canada-wide rent report we look at recent market trends, overall rent rates, and affordability metrics to provide a near real-time analysis of the state of the Canadian rental market.

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.

In the 3 Bedroom All category we’re seeing a higher ratio of declines as we saw in the 3 bedroom house category. Typically more affordable cities such as Quebec City (+31.7%), Peterborough (+4%), Sudbury (+5.9%), Belleville (+5.4%) are still experiencing increases due to more people possibly moving into the area to find larger, cheaper rent alternatives outside of the more expensive cities.

Most cities continued to experience declines in the 3 bedroom rent category with Toronto (-18.7%) as one of the highest drops. In the west coast, Victoria (-13.4%) experienced a heavy dip in 3 bedroom home rents, coming down to just under $3,300 and Vancouver experienced (-4.5%) a decline to $3,800. In Ontario, we mostly see further rental declines and stabilization with a few outliers such as Guelph (+6.4%), Bellevile (+2.1%), Markham (+3.5%), Peterborough (+12%), Sault. St Marie (+5.7%) and Scarborough (+7.8%) experiencing smaller rent increases.

The 2 Bedroom All category overall made more gains this month compared with 2 bedroom condos and apartments. Toronto (-5.5%) and Vancouver (-6.6%) continued with declines as other regions of Ontario and British Colombia has rents pushed up. Notably Belleville (+7.9%) and St. Catherines (+7.8%) experienced gains within Ontario. In the west coast, Calgary (+3%) saw modest increases along with Victoria (+3.8%) and Kelowna (+3.8%). This may be a sign that demand for larger units such as 2 bedroom townhouses or houses is increasing in the more affordable cities.

In the 2 bedroom condo and apartment market, we’re seeing a similar story play out as in the 1 bedrooms with large cities experiencing rent cuts and smaller cities making rent gains. Similar to 1 beds, there are quite a few smaller Canadian cities making MoM gains such as Sarnia (+25.7%), Saskatoon (+22.7%) and St. John’s (33.3%). Around the GTA, rents are down almost across the board this month with Milton (-23.8%) leading the rent drops putting it in YoY decline of -13%. Montreal (+7.5%) was the only mega city making gains in this category.

Last month this category saw overall declines in rents, however this month we’re seeing many gainers in this category. Notable jumps in this category were Brantford (+23.6%), Scarborough (+24.2%), Vaughan (+27.5%) and Charlottetown (+24.3%). Notable declines were experienced in Markham (-13.2%), Milton (-18.4%) and Sherbrooke (-19.1%). Once again, more pressure to downsize may be causing the gains in the typically more affordable cities.

For all housing types, rent by square footage showed interesting trends in the GTA. Cities nearby the Toronto core such Mississauga (+10.5%), North York (+20.2%), Etobicoke (+9.9%), Oshawa (+7.4%) and Scarborough (+11.2%) all saw increases in price per sqft over the last month. This may signal that demand for larger spaces is increasing in the GTA.

The 1 bedroom condo and apartment market continues to slow down with Toronto (-8%) only going negative to $2300 eroding last month’s 3.3% gain and Vancouver (-7.6%) continuing its negative trend, down to $2495 with a larger decline than last month. 20 cities on the other hand, actually saw gains in the 1 bedroom category. We’re starting to see larger markets continuing to show stabilization while smaller markets face growing demand of renters. Tighter rental markets in smaller areas could possibly be due to movement of people out of high rent areas of the major metropolitans in search of lower rent.

Markham ($1.97/sq. ft) and Mississauga ($2.09/sq. ft) saw significant average rent per square foot percentage increases at 18.7% and 20.8% respectively. Out west in BC, Kelowna ($2.24/sq. ft) saw a 15.5% increase in average rent per square foot. Kitchener saw a notable decline of 6.7% at ($1.95/sq. ft).

The average rent by square foot in the Condos/Apartments class has come down in many regions in Southern Ontario with St. Catherines and Niagara Falls dropping by 16.7% and 13.1% respectively. St. Catherines is now at $1.82/sq. ft and Niagara Falls is at $1.74/sq. ft. Condos outside the Toronto core in neighbouring areas of Scarborough ($2.87/sq. ft) and North York ($3.53/sq. ft) have increased 22.1% and 14.5% respectively.