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If you’re a Canadian property owner, manager or renter, here is the scoop from this year’s Ontario Rental Market Overview & Outlook.
Hosted by Canada Mortgage and Housing Corporation and Federation of Rental-Housing Providers of Ontario, the market survey results were presented at the FRPO & GTAA (Greater Toronto Apartment Association) Rental Market Update Breakfast that took place on February 8, 2018. Industry leaders attend these sessions to gather key analytical data about marketing and rent trends along with policy updates for the apartment and purpose-built industry.
CMHC’s Ted Tsiakopoulos, regional economist, and Dana Senagama, principal, market analysis for the GTAA, spoke about the new data released in this year’s report. While the presentations focused on Ontario, the report also includes information about other provinces. Keep reading for some key takeaways.
Tightening Up
Since 2015, Ontario’s economy has been growing faster compared with the rest of the country, and it’s not surprising that Ontario and British Columbia are still the tightest rental markets. Toronto is experiencing record low vacancy rates, influenced by the job market, demographics, cost gap, expectations and new rental supply. Due to lack of supply and slow building, the GTAA also reports accelerated rent growth – up 4.2%. The expectation is that vacancy rates still have room to fall – and rents will keep growing.
Regarding housing types, there’s a higher domestic investment in condos, with 32.7% of condo units rented in 2017 (compared to 30.1% in 2015, and only 18.8% in 2008). Condo rentals significantly outpace apartment rentals. Rentals show a flattening out in the growth trajectory, and new building trends, there is the added challenge of lengthy construction timelines (up to three years).
Shifting Demands
With renter households outgrowing supply, demand in Ontario is shifting to less expensive housing. Rents for new purpose-built suites are prohibitively expensive for many renters, and only 18% of renter households can afford them. As a result, the demand for secondary rentals — such as basement apartments — is increasing. While migration to Ontario is easing it remains above the decade average, exerting further pressure on the supply-demand imbalance. Outside of Ontario, it’s a different story: Alberta and Newfoundland are currently seeing the highest vacancy rates.
Vacancy Pressures
Regarding risks to Ontario vacancy rates through 2019, the following factors were cited in the report:
Risks exerting upward pressure
- Much slower pace of business investment/hiring
- Elevated household debt among younger adults
Risks exerting downward pressure
- Stronger youth job market and release of pent-up demand
- Stronger U.S. economy and forecast
- More significant erosion of ownership affordability
- Stronger international migration
- Policy changes (rent control, minimum wage)
It was projected that rental market turnover will remain low for the near future given rent controls, eroding affordability and population aging.
Millennial Trends
When targeting renters, apartment owners and managers are likely becoming aware of the dip in millennial ownership rates, along with the decrease in first-time home buyer demand — thanks to eroding affordability. Is it a blip or a new downtrend? Time will tell. Current statistics show that over 45% of renters are under the age of 44 and they also carry the most debt at nearly 45% — compared with renters over the age of 65 who represent nearly 20% of the renter population while carrying under 15% total debt.
Moving Forward
Whether facing high demand and low supply or the risk of vacancy loss, it’s clear that smart marketing strategies and access to better data on their properties are needed to keep property owners and managers attract and retain the right type of residents to be on track with trends in every market.
Learn about Yardi’s solutions for mobile marketing, leasing, screening and property management. Get more information about CMHC, Canada’s authority on housing.
