The Rental Market Report has arrived from the CMHC (Canadian Mortgage and Housing Corporation), and Ontario provincial highlights show that despite there being less options to do so, more people are choosing to stay in a rental situation for longer periods. With sky-high prices, ongoing employment instability, and plain confusion over the real estate market, it seems that for many, renting is generally a safer and more feasible option than buying a home in 2015.
Some good news from the report is that rent for two-bedroom apartments in Ontario grew by only 2.1 per cent -- much less than the 2.7 increase in 2014. This reduction in rental prices can be attributed to slow income growth and the viral-like spread of condo units throughout large urban areas. Some renters in the province -- people residing in places like Kitchener, Peterborough, and Ottawa, for example -- enjoyed growth rates as low as 1.5, 1.6, or 1.7 per cent, respectively, making right now a good time to be paying month-to-month.
However, the overall 2015 vacancy rate for Ontario is now sitting at 2.5 per cent -- a drop from 2014's rate of 2.8 per cent, and from 2013's 2.6 per cent. As can be gleaned from the Statista graph included here, a vacancy rate of 2.5 per cent is the second lowest figure Ontario has seen in the past eleven years. Demand (and therefore competition) for rental units is way up, and in some areas (such as Guelph), the vacancy rate is as low as 0.6 per cent.
Since the recession, young people have encountered considerable difficulties in finding ideal employment: positions that not only pay well, but provide benefits and long-term job security. As a group, youth are much more likely to rent their homes, but with poor job prospects across the country, they'll often stay home with mom and dad longer, delaying their move into a rental unit. When they do move out on their own, they're often forced into renting for the long term because of unstable and low-wage work.
Additionally, the price gap between owning and renting is again up, making it all the more difficult for people to save enough money to afford to buy even low-priced homes. Columnist Tamsin McMahon spells out the situation in detail for The Globe and Mail in an article from February of this year. In "Price gap between condos, houses swells to record level," McMahon argues that condominiums were once considered a stepping stone between the rental household and a detached home; they were a great way to enter the market without spending a fortune. But between today's urban condo explosion and resulting high-price bidding wars, and detached homeowners' unwillingness to sell (often attributed to a lack of new development -- in other words, lack of buying options), it's making much more sense for the potential condo buyer to simply wait and keep on renting.
Obviously, high-rise development in Ontario (and especially in big cities like Toronto) makes affordable housing an ever-more precarious situation. As Rob Carrick reports from The Globe and Mail this past May, "thirtysomething is the new twentysomething when getting into the real estate market," stressing that patience pays in today's world of high prices and interest rates, and that renting for longer can mean more mobility, freedom, and savings -- especially for young people. And as Bruce Yaccato (perhaps more bluntly!) states in the National Post this June, "You'd have to be crazy to buy real estate," attempting to put to rest the ongoing (and mass) delusion that it's always great to invest in property, no matter what the numbers are telling us.
Those who want to follow the advice of investors and experts will keep on renting for the time being. With much lower vacancy rates, it's harder to find an ideal apartment to rent in Canada. In such a competitive and confusing landscape, renters need to take advantage of all the help they can get, from wherever they can get it. For now, the best advice seems to be to keep renting, and cultivate patience before diving into owning that detached dream home or condo.
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