One of the by-products of the overheated housing market in Canada is renters facing increased rental rates for family homes outside of big city centres.
In some cases, renters say they are losing out on potential rentals as many of the competing bids are hundreds of dollars more than what was first advertised. Part of the reason is many Canadians have been priced out of the housing market and their only option is to rent as they wait for a slowdown or correction in the real estate market.
The impact of home prices and sales on the rental market
For example in June 2021, according to the Teranet National Bank composite price index, home prices were up 16 per cent year-over-year. Home prices were up 10 per cent or more in an unprecedented 90 per cent of 32 urban markets and up 30 per cent or more in 42 per cent of these markets.
Those increases were largely driven by areas outside of the urban centres like Toronto and Vancouver. According to the Toronto Regional Real Estate Board (TRREB) in areas outside of Toronto like Burlington and Oakville average prices rose 23 per cent to $1,222,263 in June 2021.
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Rental bidding wars outside urban centres
As smaller condo units and urban homes fall out of favour for home buyers, renters are also exploring the charm of living away from the city centres. Therefore, the rental bidding wars being experienced are mostly happening in suburban areas
This is despite vacancy rates going up in the last year. In the latest CMHC rental market report vacancy rates went from two percent in 2019 to 3.3 per cent in 2021. But the average price to rent a two-bedroom apartment was up 3.6 per cent from $1,113 a month to $1,165.
Rental pricing increases can be substantial
Windsor real estate agent Preetinder Brar says housing prices in that city have risen substantially in the past two years. He estimates a semi-detached home that will rent for $1,800/a month today could only command a monthly rent of $1,200 two years ago. That is even higher for detached homes.
Speaking to CBC News Brar says “If you're talking about a full house, you could easily [rent it] for $1,800. Now it's gone up to $2,600 — even $3,000."
Toronto realtor, Sebastien Rahman, says rental demand is also increasing because of a robust vaccine rollout out and easing of travel restrictions.
“The real estate market is red hot and rental prices are increasing too,” Rahman says.
“I have seen good single-family homes rent for more than what they would have only a few years ago, the pandemic is creating a need for homes with a little bit more elbow room on the rental side and on the buyer’s side,” Rahman says.
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Rental bidding wars in University towns for students
Rahman adds rental markets around universities and colleges are also heating up as students anticipate a return to in-person learning.
Reno Zankl is the owner of E Z Property Management Ltd. He manages rental properties for a number of landlords. He says part of the problem is rental property owners are cashing in on the hot housing market.
“Homes that used to be duplexes or even triplexes are being sold by landlords and the new owners are wanting to turn it into a single-family home,” Zankl says.
In other words, just as families are moving out of their old rentals to look at buying a home, the landlords are increasing old stagnant rent prices to keep up with the rising trends making it harder for new tenants to afford a place to live.
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The bottom line
Before you rent a new place refer to the rental rights in your province or territory. In Ontario, you can find it here. Make sure you’re not being taken advantage of just because the house you are looking to rent is in high demand.