Let’s talk about the rental market today.
I want to share some data from the rentals.ca February report.
Can you name the 6 largest rental markets in Canada?
Toronto, Vancouver, Calgary, Montreal, Ottawa and Edmonton.
Which one is the most expensive?
You bet, Vancouver.
With the average rent for 1 bedroom units sitting at above $2,700.
The second most expensive?
No surprise, Toronto, with 1 bedroom rent at almost $2,500.
The cheapest one?
Edmonton, at $1,100. That’s only 40% of the rent in Vancouver.
For 2 bedroom units, rent is above $3,700 in Vancouver and $3,200 in Toronto.
While in Edmonton, 2-bedroom rent is only around $1,400, that’s half price of a 1 bedroom unit in Vancouver!
You see, rents are significantly more expensive in high demand cities.
We know inflation has been high up at around 6-7%.
What about rent inflation?
The range is very big again depending on which city you are looking at.
Which city do you think has the biggest rent inflation?
Yup, the most expensive city actually saw the biggest rent increase.
Vancouver had an annual rent increase of 22.9% in January.
Calgary came second with a 22.7% annual rent increase.
Toronto came third with a 20.8% increase.
Montreal only saw a 7.9% increase.
This kind of rent increase is just another piece of data that tells you the Canadian housing market is backed by real demands.
Let’s zoom into the Toronto market.
Demand continues to exceed supply, that’s why we saw a 20% rent increase compared to the beginning of last year.
Remember this video where we talk about a record number of condo completions coming along to the Toronto market.
This will create a spike in supply and help to slow down the rent increases a little bit.
So if you are a landlord with a unit in a new building that just got completed, how should you price your rent?
The challenge with a new building is that many units become available for rent all at the same time.
You may be competing with 30 other one bedroom units.
With that kind of selection, tenants are of course price-driven.
It typically takes around 3 to 4 months for the market to digest all the units in a new building.
So I would recommend pricing your unit on the lower end.
The goal is to minimize your vacancy period because every vacant day costs money.
This way, you can also attract more applications so you have better selection of high quality tenants.
Besides, your unit won’t be under rent control, so you can increase the rent to any amount you like 1 year later.
If you are a landlord with a unit first occupied before November 15, 2018, you are probably shaking your head right now.
The big rent increases have nothing to do with you because your unit is under rent control, you can only increase your rent by 2.5% in 2023.
Yup, I’m one of those landlords as well.
Here’s how I look at it.
If I bought the unit before 2018, I am enjoying a very significant price appreciation.
So yes, I’m missing out on a couple thousand dollars of rent increase in the year, but compared to the capital gain I earned, that’s really nothing.
We can’t always expect to win everything, right?
I have to wait till the current tenant moves out, then I will be able to relist the unit for rent at the market price.
Now, the million dollar question…
Can you get your current tenant to leave so you can find a new tenant at the market rent?
There are only 2 legitimate reasons to ask your tenant to leave.
Reason #1, you need the unit back for self-use, that can be for yourself or your immediate family member.
Reason #2, a buyer is purchasing your unit for self-use.
In both cases, you will have to pay your tenant one month’s rent as compensation.
Just one last piece of update before I go.
If you have been trying to rent your unit and feel that the market seems slow, that’s normal because we were deep in the winter.
January is typically a slow month for rental.
But since last week, we have had a large influx of offers.
So I can sense a shift in market dynamics and I expect to see very strong rental demand come spring.
If you want to stay on top of the market, make sure you subscribe and hit the bell now.