According to the Consumer Price Index Report of July 2024 According to Statistics Canada, the housing factor of the buyer price index rose 5.7% year-on-year, outpacing the final inflation rate of two.5%. This is a seamless trend – housing costs have at all times been one in all the essential drivers of inflation. Within the housing category, rental prices have been particularly strong, rising 8.5% year-on-year in July. This continued pressure from housing costs has made it harder for the Bank of Canada to bring general inflation back to its 2% goal, despite price declines in other categories.
How did rents develop into so expensive?
Why is housing so expensive in Canada? Quite a lot of aspects have contributed to the high cost of housing, especially rent. Here are a number of the essential aspects:
- Demand greater than supply: The demand for rental housing in Canada has been growing faster than supply for years, which has led to a really competitive rental market and thus rising prices. A recent report states: Statistics Canada found that the variety of renter households in Canada has increased by 21.5%, far outpacing the 8.4% growth in the overall number of householders. This signifies that the number of individuals in Canada in search of rental housing continues to rise, at the same time as supply decreases.
- Record low emptiness rates: In many Canadian cities, the emptiness rate for rental apartments is incredibly low, which inevitably drives up prices. According to a report by the Canadian Mortgage and Housing Corporation (CMHC)The country is facing a record low emptiness rate of 1.5%, while rents are reaching record highs.
- Inflation: The rising cost of living, including housing costs, is a serious driver of inflation in Canada, which in turn results in rising rents. In October 2023, annual rent inflation reached a whopping 8.2%the best level in over 40 years.
- Population growth: A significant increase The influx of foreign students and immigrants has also contributed to the housing crisis. This increase has increased competition for rental apartments, especially in major cities where many students and newcomers move, comparable to Toronto and Vancouver.
It’s a cycle. Demand for rental housing exceeds supply, driving up prices and making it harder for each newcomers and long-time residents to seek out reasonably priced housing.
Will rental prices in Canada proceed to rise?
Statistics Canada There have been signs of a decline in rental prices, but each rents and mortgages remain the largest drivers of inflation at present. In August 2024, rents rose 8.9% year-on-year, but just one% month-on-month.
And in line with a report by Village CanadaIn August 2024, rental prices in lesser cities increased month-over-month: “Quebec City was one of the few cities where the average monthly rent increased – by 1.89% to be exact, a $25 increase. The only other major city where prices rose was Edmonton, at 0.6%. The average rent in Montreal and Halifax remained stable at $1,650 and $2,200, respectively. Vancouver, meanwhile, saw the largest month-over-month decline of -2.95%, followed by Calgary and Ottawa, each at -2.28%.”
As rates of interest fall and mortgage rates develop into more favorable for landlords, rents may fall. However, supply and demand may put pressure on rents to stay relatively high.
Guidelines for rent increases
In Canada, each province and territory has its own rules for what someone can charge for rent, it’s due to this fact essential to ascertain what rules apply to your regional housing situation. For example, OntarioRents are regulated by the Residential Tenancies Act (RTA), which sets the utmost limits by which landlords can increase rent annually. For 2025, landlords are usually not allowed to extend rent by greater than 2.5%. However, note that there are exceptions when a landlord can charge the next rent, comparable to when an old tenant moves out of the rental property or when the property is newly built.
Regardless of where you reside, there are generally protections in place to forestall landlords from charging unreasonable rent or arbitrarily increasing rent. Again, the Ontario example applies: if a tenant believes their rent has been unfairly increased, they will file an application with the Landlord and Tenant Board (LTB) to contest the rise.
