Canada renters get first relief in three years

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Renters rejoice, relief may be on the way.

Skyrocketing rents over the past few years has piled pressure on Canadian households already struggling with high inflation.

October brought the first relief in three years when the asking rent for apartments across Canada fell, with the most expensive markets in Toronto and Vancouver showing the biggest declines.

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The asking rents in Canada averaged $2,152 that month, down 1.2 per cent from the year before — the first decline since July 2021 during the COVID-19 pandemic, according to a report by Rentals.ca and Urbanation.

In Toronto, the asking rent for a two-bedroom apartment dropped $320 or 9.4 per cent from a year ago while Vancouver posted an even bigger decline, dropping $478 or 12 per cent, said Rachel Battaglia, an economist with Royal Bank of Canada.

But is this relief temporary or the start of a new trend?

In the RBC report, Battaglia looks at this question and finds several forces are working to lower rents.

First, there is more supply.

Completion of rental units from construction projects started in years past have increased significantly in recent quarters, she said. Over the past decade, the number of purpose-built units started almost quadrupled after the introduction of government incentives.

In Toronto and Vancouver rental construction outpaced population growth, she said.

Second, there is less demand.

Lower immigration targets set by the federal government this year have already curbed population growth among foreign students and temporary workers, who often rent their housing, said Battaglia.

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The full impact of the government’s new targets is yet to be seen, but it is expected to shrink the country’s population growth by 400,000 households over the next three years, she said.

The weaker labour market is also easing demand. Canada’s unemployment rate has gained almost 1 percentage point from last year, with the steepest increases in the country’s big cities.

The jobless rate among young workers is especially high, forcing younger tenants to move back home because they can’t afford rent or move in with others to share expenses, she said.

According to the rental report, shared accommodation or roommate rentals grew in popularity and availability in October, with listings up 12 per cent from the month before and 58 per cent year over year.

For rents to decline at the national level year over year is rare, Urbanation president Shaun Hildebrand told The Canadian Press.

“This is happening as the key drivers of rent growth in recent years — a strengthening economy, quickly rising population, and worsening homeownership affordability — are beginning to reverse,” Hildebrand said.

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“As a result, we can likely expect this trend for rents to continue in the near-term, particularly as apartment completions remain at record highs.”

RBC also expects further “rent market rebalancing” or at least contained rent growth in the year ahead.

The caveat is that lower rents and less competition could attract others to the market, said Battaglia.

“This, alongside the chronic undersupply of rental housing, should contain any rent declines as the market searches for a new equilibrium,” she said.

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Americans might have something else to be thankful for when they sit down to Thanksgiving dinner tonight — a slightly cheaper meal.

According to the American Farm Bureau Federation, the classic feast for 10 will cost $58.08, down 5 per cent from last year, but still 19 per cent higher than five years ago.

Turkey prices fell 4 per cent this year, but are still 20 per cent higher than three years ago, said Sal Guatieri, an economist with BMO Capital Markets, who brings us today’s chart.

That’s a much steeper inflation than ham, up 7 per cent, roast beef, up 5 per cent and steak, up 2 per cent.

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• U.S. markets are closed for the Thanksgiving holiday
• Saskatchewan Finance Minister Jim Reiter will present the province’s mid-year financial report.
• Today’s Data: Canada’s current account balance

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Today’s Posthaste was written by Pamela Heaven, with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

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