Rental rates expected to drop following COVID-19 crisis according to realtor.ca report

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Ontario Construction News staff writer

With most of the country on lockdown during the second half of March, the housing market is not operating normally, as most prospective tenants can’t view units, existing tenants don’t want to leave their homes in the midst of a health crisis, and the number of people moving will fall significantly, according to the rentals.ca April rentals report.

“Most provinces have prohibited evictions, as many tenants can’t make rent due to either a temporary closing of their place of employment, or being laid off due to COVID-19,” Ben Myers, President of Bullpen Research and Consulting Inc., wrote in a report for rentals.ca. “Considering all these factors, there is concern that average rental rates across Canada could plummet as much as 20 percent.”

According to rentals.ca listings data, the average monthly rent for Canadian properties in March was $1,842, an increase of 1 percent from February 2020, and 1.2 percent over 2019.

In the first quarter of 2020, median rent in Canada for all property types was $1,750, the lowest level over the past five quarters, and 0.8 percent lower than the same period last year.

With the market not operating “normally” since the start of March because of COVID-19, typical seasonality is expected to be disrupted, especially in municipalities with a high concentration of students who could spend the entire semester at home taking classes online and not living in housing close to the campus, according to the report.

Single-family homes showed the greatest annual decline in average rent between March 2019 and March 2020, dropping by 6 per cent from $2,666.

Condos experienced a 1.4% year-over-year decrease between March 2019 and March 2020, and a monthly decline of 0.6% between February and March.

Rental apartments, which make up the majority of the listings on Rentals.ca, experienced a 3.5 percent year-over-year increase and a month-over-month increase of 0.6 percent.

“Given the large size of rental apartment listings, it is the most reliable property type to review and is the most reflective of rental market conditions nationally,” Myers wrote.

Comparing provinces, Ontario had the highest rental rates in March 2020, with landlords seeking $2,244 per month on average. British Columbia was second at $1,959, and Newfoundland and Labrador had the lowest at $934.

On an annual basis, Ontario is up by 3.8 percent, Alberta dropped 5.2 percent and Saskatchewan rents fell 14.4 percent from March 2019.

Ontario also had the highest average rental apartment asking rents at $1,987 per month, which is an increase of 12.6 percent year-over-year, with the median rent up more than 13 percent.

One-bedroom units ranged from a high of $1,758 in Ontario to a low of $929 in Saskatchewan. It costs a tenant about half as much to live in Saskatchewan than Ontario. One-bedroom units account for 41 percent of all rental apartments for rent on Rentals.ca nationally in 2020.

“With the COVID-19 pandemic about to have a major impact on rental rates in Canada, the annual changes are not as relevant in the short term as monthly changes,” Myers cautioned.

Kitchener rents jumped 3.9 in March and Vancouver rates were up 3.5 percent monthly, despite the annual decline while Toronto condo and rental rates declined by 1.5 percent.

“Many landlords are facing significant income loss, as a percentage of tenants don’t have income to pay their rent, while others who are low on funds are choosing not to pay rent to ensure they have money for food,” Myers wrote in his report.

“Unfortunately, there is another small portion of tenants that are taking advantage of the fact they can’t be evicted to skip out on rent.”

Considering the above factors, Rentals.ca expects listings to surge, as landlords are careful about who they rent to in order to avoid missed payments.

“The market will not function normally over the next few months as the economy is on pause,” Myers concluded.

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