14 Mar Torontonians are Struggling in a Red Hot Rental Market
For many people living in Toronto, the idea of owning a home is a fantasy and becoming comfortable with renting is required to live in the city. The house bidding wars have been standard practice in Toronto for quite some time, but bidding wars for rental units are becoming common as well. Toronto’s overall condo apartment vacancy rate is 1% according to CMHC, and this is the lowest rate seen in 7 years. The cost of rent has also been going up according to the Toronto Real Estate Board. The average rental apartment on the MLS in Q4 2016 was $1,778 which is a 7.4% increase from one year before.
Explaining the Rental Market Situation
Rents in Toronto are directly related to the increasing real estate prices and that the fact that many homebuyers have been priced out of the homebuyers market. Due to ever increasing real estate prices and new mortgage lending rules, almost 50% of home buyers in Ontario are postponing their next home purchase and are renting instead.
The Government’s Involvement
In an effort to cool the housing market, Canadian federal government introduced new mortgage stress testing regulations. Potential homebuyers must now qualify for the Bank of Canada benchmark rate of 4.64% which is higher than the 2.7-%-2.9% offered by most banks.
According to an Ipsos Reid poll conducted on behalf of the Ontario Real Estate Association, these rules prevent around 45% of home buyers from getting a mortgage. 79% of all Ontario homebuyers say that these new rules will impact their home buying decision. For those who do not delay their home purchase, they now need to put down additional money as a down payment or look for a cheaper home.
The end results of these rules are putting more demand on rental properties, which was already a market with a troubling lack of supply. The overall vacancy rate in Canada is 3.3% according to 2016 statistics. Around 70% of Ontarians that currently rent say that they will eventually want to own a home, but most can’t afford the down payment. Without a dramatic change in market conditions, many Canadians will have to settle for renting their home.