Newcomers and Interest Rates Fuel Canada's Competitive Rental Market
It's spring in Canada, and the rental accommodation market across the country remains "highly competitive," fueled by the continuing arrival of newcomers and international students and interest rates.
A new report by Rentals.ca and Urbanation shows that average rents across the country rose just one percent between February and March. That is the first month-over-month increase since November 2022.
For both pre-arrival newcomers and those who have recently landed, the asking rents for all available property listings have increased 10.8 percent from March 2022 to reach an average of $2,004 nationally.
Vancouver, Toronto are the priciest markets
The gateway cities of Vancouver and Toronto are the most popular landing spots for newcomers to Canada - and they remain the most expensive.
Vancouver remains the priciest rental market in Canada, with a one-bedroom priced at $2,743 dollars. Two-bedroom properties reached an average $3,653.
Toronto is the next most expensive, with a one-bedroom averaging $2,506. The average two-bedroom home is now $3,286
Immigration is fuelling rental demand
Canada's ambitious immigration targets are definitely fuelling rental demand and competition for available rental accommodation.
Canada plans to welcome 465,000 new immigrants this year after admitting a record-breaking 431,000 newcomers in 2022, mainly from India, the Philippines and China.
The country hopes to land 485,000 newcomers in 2024 and 500,000 in 2025. Canada has also welcomed a record number of international students, with those numbers continuing to rise.
Interestingly, according to the Rentals.ca report, two popular newcomer landing spots - Scarborough and Brampton -saw the most dramatic annual rent price growth. In March, rates in those two GTA cities climbed year over year by 34.9 percent in Scarborough (average rent $2,527) and 29.1 percent in Brampton ($2,518).
Smaller markets are a better deal for newcomers
For those newcomers and international students looking to live in smaller markets, the pricing is better. A one-bedroom in Surrey, B.C., is $1,894, and in Calgary (now also considered a gateway city), it's $1,573.
Canada's western provinces, in particular Alberta and Saskatchewan, continue to have the lowest rent prices by far. Nine of the 10 most affordable cities in the Rentals.ca report were in western Canada.
Lloydminster, Alta., had the lowest rent prices of the 35 cities surveyed in the report. A one-bedroom unit was $820, (a two-bedroom rented for an average of $925).
Further rent hikes are expected
Shaun Hildebrand, the president of the real estate research firm Urbanation, said spring arrived with a "highly competitive rental market in Canada, driven by a record population increase of over one million people in the past year and low home ownership affordability after last year’s spike in interest rates."
"With supply unable to keep up with current levels of demand, expect further upward pressure on rents in the coming months."
Rental housing demand is definitely outpacing supply, partly because average asking rents increased by $196 over the past year.
The rental market will tighten even more this year
All of Canada’s six largest rental markets saw rents rise by more than 10 percent over the past year.
The rental market is expected to tighten further through 2023, according to a recent report from Canada Housing and Mortgage Corporation (CHMC).
According to the report, writes Zakiya Kassam in storeys.com, higher mortgage rates, dwindling housing supply, and mounting economic uncertainty will drive more Canadians to the “already strained” rental market. This will tighten rental conditions for newcomers to Canada and international students who have recently arrived or who are coming this year. These conditions will definitely drive rent prices higher for immigrants.
The report also notes that in immigrant-popular cities such as Toronto, the vacancy rate, is now set to drop from 1.5 percent in 2023 to 1.4 percent in 2024, and then to 1.3 percent by 2025.
Other rental options for newcomers
However, newcomers and international students have lots of rental options and strategies for finding rental accommodation in Canada's extremely competitive market. Those options include:
- Find your own apartment with landlords who value newcomers
- Work with a real estate agent to find a rental
- Rent a room with a home-sharing host
- Find international student housing
Prepare for Canada and Rentals for Newcomers have recently partnered with real estate fintech solutions company Souqh to help interested newcomers work with a real estate agent to find their first rental in Canada.
They've also partnered with the Canadian home-sharing company Sparrow to enable newcomers to rent a room for a minimum of two months and up to a year.
Newcomers need to arrive prepared
Pre-arrival newcomers and those who recently landed should do their research about the Canadian rental market and be ready when they meet landlords, said Prepare for Canada managing partner Dave Frattini.
“Vacancy rates in most cities across Canada are now hovering around 2 percent,” said Frattini, “meaning landlords have all the power in choosing the tenant they want. For newcomers, this means searching for accommodation in Canada is more difficult than ever.”
As the new CMHC report concludes: “We’re anticipating that with the continued high levels of immigration, workers returning back into Toronto, and students coming back as well, we will see the vacancy rate remaining very tight. And the supply of purpose-built rental units is still very low and not keeping up with the heightened anticipated demand going forward.”
*No AI-Generated content was used in the writing of this story, and all sources are cited and credited where possible
