Rent prices surged as the supply struggled to keep up with high demand
Canada’s rental market reached the lowest national vacancy rate last year since Canada Mortgage and Housing Corporation (CMHC) began tracking data in 1988, with rent prices surging as a result.
According to CMHC’s annual survey, purpose-built rental apartments had a 1.5% vacancy rate during the first two weeks of October 2023, falling from 1.9% at the same time last year.
Meanwhile, the average rent for a two-bedroom purpose-built apartment grew by 8% in 2023, amounting to $1,359 in a significantly greater uptick than the 5.6% average rent increase seen in the previous year.
Kevin Hughes, the deputy chief economist at CMHC, said that the data did not come as a surprise, further explaining that the rise in rental supply in most Canadian cities wasn’t enough to keep up with the demand.
“We have a chronic lack of supply in Canada and the statistics really are not, let's say, encouraging in terms of new additional supply or substantially increased supply,” said Hughes.
“As we go through this current year, we would probably expect that there will be delays in some projects because of financing. There's also, in many markets, labour shortages for construction.”
CMHC found that Calgary and Edmonton had the lowest vacancy rates with 1.4% and 2.4% respectively. The two largest cities of Alberta also saw the highest rise in rents among major cities in the country.
“Those were markets that were, let's say, more balanced last year,” said Hughes.
Meanwhile, Toronto had a 1.4% vacancy rate while Montreal was at 1.5%. Vancouver had the lowest vacancy rate among major Canadian markets at 0.9% while Ottawa was at a 2.1%.
“Very tight markets usually entail heavier increases in rent, which we've seen,” said Hughes. “Yes, the rental market is more affordable than the ownership market, for sure, but even that market is becoming quite daunting for many.”