Rental demand, as a consequence of Canadians priced out of the ownership market, has put immense pressure on supply, but the wrong policies are being touted as solutions.
“Supply is not keeping up with demand and there is considerable demand for rental as it becomes more and more difficult for young Canadians to get into the market,” Benjamin Tal, deputy chief economist at CIBC Capital Markets, said during a webinar last week.
“We are trying to fight a supply issue with demand tools. Rental must be part of the solution to introduce affordability into the system and I think purpose-built is the only solution.”
The issue remains that building practices have not changed much in at least the last four decades, however, Tal is dismayed that there’s scant innovation in the market, a problem that’s on the precipice of becoming especially acute, he warns.
In 2020, Canada’s population declined to 200,000 from 500,000 a year earlier, but, in fact, there were 70,000 Canadians who’d returned from chaos-addled Hong Kong, with yet more likely on their way, and chose to settle in Toronto and Vancouver where rental demand is highest, and there were an additional 70,000 foreign students whose visas expired but who were stranded in the country and permitted to stay by the federal government.
“The other thing we’re seeing is we raised the (immigration) target to 410,000 from 350,000 and the population rate will accelerate,” said Tal. “Already, Canada is the fastest growing country, in terms of population, in the OECD [Organisation for Economic Co-operation and Development], almost double what the U.S. is growing at.”
Ontario’s net population growth averaged 145,000 between 1990 and 2017, Ben Myer, president and owner of Bullpen Research & Consulting, said during the webinar, but that number is on the verge of exploding.
“To see it go all the way up to 250,000, we saw huge pressure on the rental market,” he said. “We had double-digit increases in the GTA in both 2018 and 2019, and some areas of the GTA went up 17%, 18%, in terms of their rents. The government also made changes to the mortgage stress test, which made it difficult for some Canadians to find a home and others couldn’t purchase what they wanted to buy, so they just stayed in the rental market.”
Myers added that a lot of people have been approved to come to Canada and they have already started working for Canadian companies remotely, but their goal remains to come to Canada as soon as the pandemic is over.
Moreover, nearly a third of international students choose to stay in Canada once their residencies are over.
“Another 30% of students who study in Canada stay in Canada,” said Susan Tjarksen, managing director of Cushman & Wakefield. “The younger they are, the more their propensity to rent versus own.”