It’s becoming harder for renting Canadians to make a move to condos. This is according to an RBC housing report that indicates the high price of single-family housing is driving demand for condos and creating intense affordability pressures.
“An increasing number of buyers have been shut out of the higher-priced single-family home categories and turned their focus toward lower-priced options—mainly condos,” the report reads. “Trouble is, this stronger demand for condos resulted in sharper price gains and affordability erosion.”
A widening gap
Penned by RBC economists Craig Wright and Robert Hogue, the report states that RBC’s affordability measure for condos in Canada rose by 2.8 percentage points in 2018, compared to the 0.9 percentage point uptick in affordability for single-family detached homes.
Moreover, the gap between renting an apartment and owning a condo is also widening. The average monthly premium of owning a condo in Vancouver, Toronto, Victoria and Montreal is $900 more a month than that of renting a two-bedroom apartment.
“And that premium has ballooned in the past three years,” the report claims. “Condo buyers paid $843 more a month (a 119% surge) than they did at the end of 2015 in Vancouver, $663 (140%) in Toronto and $532 (102%) in Victoria. This means that buying a condo is a bigger step up from renting than it’s ever been in these and other cities.”
The disparity isn’t a matter of shrinking rental prices, either. Rates in Vancouver, Toronto, and Victoria have all increased over the same time.
“So while owning a condo remains much more affordable than owning a single-family home—albeit gradually less so—its appeal is quickly diminishing relative to rental options in Canada’s priciest markets,” the report suggests.
Wright and Hogue conclude that demand for rentals will increase in the years ahead.
Read RBC’s report, Softer housing market in Canada provides some affordability relief.