Canadian Rental Prices Are Rising At The Fastest Rate Since 1983

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The cost of renting shelter in Canada has been rising at the fastest rate since the early 1980s. According to new research from BMO, annual growth of rents surged by 8.2% in October - the highest level since 1983. This rate is a striking 7 percentage points higher than the pre-pandemic 20-year average.

BMO Chief Economist Douglas Porter warned previously that rising rents would be a key driver of sticky inflation. That prediction is now playing out in real time.

Canadian Rents Outpace Income Growth For The First Time In 60 Years

Even more remarkably, rental price growth now far exceeds the underlying trend in personal incomes. Porter notes that over the past five years, disposable incomes have risen at an average annualized rate of 3.9%. While marginally higher than overall inflation, income growth pales in comparison to the skyrocketing cost of rents.?

"This is the first time in 60 years of records that income growth has trailed behind rents - and it's not even close," says Porter.

Could Interest Rate Cuts Provide Relief?

At first glance, falling interest rates might appear to ease the burden on renters. However, economists warn that rate cuts could further exacerbate the rental cost crisis. Surging rents likely reflect a delayed response to years of frenzied real estate speculation fueled by rock-bottom rates.

Investment drove prices up so swiftly that investors were absorbing negative monthly cash flows on rental units. And with borrowing costs stuck at ultra-low levels, investors continued to flood the market - displacing potential first-time homebuyers in the process.?

The Bank of Canada itself concluded that excessive monetary stimulus overheated housing markets globally. Regardless of rate moves, slowing speculation alone would unleash significant rental inflation due to years of excess leverage.?

Every crisis brings opportunities. As single-family homes become less affordable and homeowners face financial stress, the demand for rental properties, especially in the multifamily sector, is expected to rise. Investing in multifamily rental apartments could be a strategic move in this evolving market. To learn how you can benefit from this trend, contact me at (604) 613-1693? or [email protected] to learn more.

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Credits: Canadian Rents Outpace Income For The First Time In 60 Years: BMO?

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