Understanding the dynamics of your rental market can help you make important decisions such as investing in a new income property, selling or renovating your rental unit, deciding what rent to apply, selecting the right tenants… Here are the highlights of CMHC’s 2017 report (Canadian Mortgage and Housing Corporation).
Understand which rental market you fit in
Ontario & British Columbia: very dynamic rental markets for property owners
- Extremely low vacancy rate for rentals. The lowest rates in 16 years were found in Toronto (1.1%) and in London (1.8%). While in B.C., there are almost no rentals available (0.9% in Vancouver, 0.7% in Victoria or 0.2% in Kelowna). Therefore, landlords are fortunate to rent their homes more quickly and, above all, to be able to discerningly select their tenants from large pools of candidates.
- High rents. If the CHMC report shows that a 2-bedroom apartment is rented out on average between $1,200 and $1,300 in these 2 provinces (vs. $750 in Quebec); it is actually quite far from the current rent prices. Indeed, the report includes tenants who are in the same rental for many years. A dwelling of this size would be rented out today around $2,800 (in Toronto) and $3,200 (in Vancouver).
- Significant rent increases. In Ontario, rents have increased by 4.5% while in some Western cities, we saw rent increases of 6.2% (Vancouver) or even 22.2% (Squamish).
Quebec: condos attract tenants
- In Montreal, the vacancy rate of rented condos went from 3.1% in 2016 to 1.8% in 2017, which is below the 3% benchmark. Despite rents being 50% higher on average, tenants enjoy rental units that are more modern and up scale with plentiful amenities. The CHMC is forecasting the start of 24 to 26,000 new multi-family dwellings in Quebec in 2017 – perhaps an opportunity for you to seize?
- So the primary market (i.e. purpose-built buildings for the rental) is facing fierce competition. Property owners of this market do not dare raise their rent, which allows the average rent to remain stable and low.
Fall of oil prices, weakened employment market, and lower population from forest fires still make Alberta’s vacancy rate the highest in Canada at 7.5%. However it’s down for the first time in 3 years. These conditions also pushed homeowners to lower rents for the second year in a row (-1.1%). This is still clearly a renters market.
Who are your future tenants?
New comers to Canada
In the first years, newcomers are more likely to rent. Canada welcomes 250,000 newcomers on average every year. Consider posting your listing on immigration forums.
In 5 years, the number of people aged of 65 and greater has exceeded the number of children of 14 and less, by more than 20%. They now account for 17% of the total population. They represent the strongest part of the rental demand, especially those who are retiring. They are usually loyal tenants. Think of posting your listing the ‘old school’ way: print it and display it in local stores.
With increasing interest rates, tighter access to home ownership, rising real estate prices; young people often can not afford to be homeowners when they leave their parents’ house, so they become tenants for a few years. Nearly 21% of the Canadian population is between 20-34 years old. Repost your listing on your (and your kids?) social media accounts.
Regardless of your tenants’ profile, the secret to success is to build mutual trust and a good relationship. Read our 10 secrets to a successful landlord-tenant relationship.