Uncertainty rules Canada’s rental market as the novel coronavirus continues to spread, forcing business closures and stay-at-home orders to persist beyond initial forecasts. Although it might be too early to assess COVID-19’s true impact on the rental-housing sector, March listings data from Rentals.ca combined with new data from Urbanation and Altus Group indicate that some rent decline is likely, but it won’t be overly significant.
Variables include: job lay-offs; pay cuts; rent deferrals and delinquencies; the inability to change residences; school closures; and would-be home buyers choosing to keep on renting in light of the ongoing pandemic. Add in fewer evictions per government decree, less immigration, fewer students starting new jobs, and more young adults moving back home with their parents, and the uncertainty of the coming months escalates even further.
“With the national economy partially on pause, a significant portion of tenants have been laid off or unable to work. They will not be looking for apartments, and in many cases won’t be able to pay their current rent,” observes Ben Myers, president of Bullpen Research & Consulting. “Our expectation is that rental rates will decline in the coming months, but some of that decline will not be captured due to a big increase in upfront incentives.”
Given housing demand is heavily tied to job growth, it’s not surprising that fewer people are buying houses as lockdowns persist across the nation. Data from Statistics Canada’s March Labour Force Survey (conducted during the week of March 15 to 21, 2020) shows a decline of more than a million jobs in March compared to February, with part-time jobs taking a bigger hit than full-time jobs (down 16 per cent and three per cent, respectively).
With fewer people buying homes and more continuing to rent, Altus Group predicts the multi-residential sector will remain relatively stable and opportunistic in the coming months, but may face medium-term challenges with deal closures, leasing disruptions due to economic and employment uncertainty, and delayed building completions or renovations.
Purpose-built rental market: GTA
According to Urbanation’s quarterly rental survey, the number of purpose-built rentals under construction in the Greater Toronto Area (GTA) reached 13,580 units in Q1 2020—up from 11,557 a year ago to hit the highest level since the 1970s when modern rent controls were enacted.
Within the 72 purpose-built rental buildings completed since 2005, the average surveyed rent for available units was $2,481 per month. The vacancy rate averaged 1.0 per cent, rising slightly from 0.8 per cent a year earlier.
But, as Shaun Hildebrand, President of Urbanation points out, Q1 was made up of two distinct phases: pre-COVID-19, accounting for January through the first half of March; and post-COVID-19, accounting for the remaining two-week lock-down period.
“As rental demand declines as job losses mount, incomes are reduced, and immigration shrinks, the slowing in the GTA rental market that appeared in the last half of March will progress for at least the next few quarters given the current economic outlook,” he says. “The impact on rents will be something to watch, which will also be influenced by the timing of the record number of units that were expected to complete this year.”
Canada’s rental market by region
In terms of monthly payments, Rentals.ca listings data shows that the average rent for all properties in Canada for the month of March increased 1 per cent from February to $1,842, but decreased by 1.2 per cent annually.
Eight of the top 10 priciest municipalities for renters were in Ontario. Urban centres experiencing highest rent growth year-over-year included: Kitchener, up 23 per cent; Hamilton, up 22 per cent; Scarborough, up 18 per cent; and North York, up 12 per cent.
Vancouver also saw rents increase by 3.5 per cent month-over-month, despite an annual decline, while Saskatoon rents dropped by 24 per cent overall.
Rental-housing analysts agree that with the market “not operating normally” since the beginning of March, the seasonally strong activity typical in the early spring will be disrupted. This is especially true in municipalities with a higher concentration of students, who will likely be required to finish the school year off at home.
Other notable trends
According to both Rentals.ca and Urbanation data, COVID-19 has led to an increase in long-term rental listings in March. With tourism and business travel having ground to a halt, both groups speculate that owners of previously furnished Airbnb units are repurposing them for long-term rental use. Rentals.ca data shows a month-over-month increase in March listings of above 12 per cent.
Meanwhile, the number of page views for rental listings and online portals has increased in six of the seven major provinces in Canada. Rentals.ca says part of the reason is that potential tenants no longer have the ability to enter the units for an in-person tour, leading to a surge in virtual viewings.
“Despite the global pandemic, we still experienced an increase in search activity on Rentals.ca in March,” says Matt Danison, CEO of Rentals.ca. “Even with financial uncertainty, people with stable employment will be looking for deals in many of the markets that were strong before the COVID-19 crisis.”