But the weakness in the rental market risks infecting the housing market.
By Daniel Tencer
MONTREAL ― The COVID-19 lockdowns have exposed a divide in Canada’s job market, with low-income earners getting hit much harder than high-income earners in the wave of layoffs that has taken place since March.
Now that divide is making itself felt in the housing market. As those on the lower rungs of the income ladder struggle to make rent, middle and higher-income Canadians are jumping back into the housing market.
The result? Rental rates rates are falling steeply across Canada, even as the housing market shows signs of life, with prices even rising in some markets.
Rental rates across Canada have fallen for three straight months and are down 7.8 per cent, on average, from before the pandemic, rental site Rentals.ca reported this week.
“Tenants have been more dramatically impacted by pandemic-related job loss than homeowners, and are not currently looking for apartments or other rental accommodation,” Bullpen Research president Ben Myers said in a statement. “This sharp drop in demand has resulted in landlords dropping their asking rents in most major markets across the country.”
Larger cities have been hit particularly hard. Rents per square foot have dropped steeply in Toronto since the pandemic and are now 9.5 per cent below their levels from a year ago,reported.
Average asking rents jumped 3.8 per cent in May in Vancouver in May, but on a per square foot basis, condo rents fell 2.4 per cent in May, and are 5.4 per cent lower than a year ago,said.
House prices rising in many markets
It’s a different story in the housing market, where real estate agents say they are seeing a sharp pick-up in activity since lockdowns started lifting. Buyers and sellers have become more comfortable with virtual tours and with social distancing measures taken during viewings, they note.
Many people pulled their houses off the market during the lockdowns, and as buyers come back, pressure is building on the market.
“The story lately has been a lack of overall inventory,” Toronto real estate Doug Vukasovic wrote in a recent report looking at the local housing market.
“For the year to date, a downward trend in pricing has already been corrected. … Even now, most properties are ripe for bidding wars, and many are getting snatched up within a few days of their being listed.”
Will the barrier break?
But the divide between the rental and housing markets could soon break down. That’s because a significant chunk of Canada’s homes, particularly condos, is in the hands of investors who rely on the rental market to pay their mortgages.
That could be a problem, especially for those investors who bought their properties in recent years at high prices. A recent report from losing money at current rental rates.found that units in many of Toronto’s new condo buildings are