The average cost to rent an apartment in Canada increased by 11.1% from August 2021 to August 2022, according to the latest national rent report from rentals.ca.
If you live in an apartment, then you’ve more than likely felt the effects of the dramatically increased rental rates in Canada.
Today, I’ll share some of the key factors contributing to the increased rental prices in Canada, along with some of the things that Canadians are doing to cope with the current market.
In August 2022, Canadian renters paid an average of $1,959 per month, according to rentals.ca. This is up from the recent post-pandemic low of $1,676 in April 2021. An increase of that magnitude is surprising, to say the least.
According to this same rentals.ca’s national rent report, the three cities that have seen the highest annual increase in one-bedroom rental prices are:
Toronto comes in at fourth place, with a 17.1% average rental increase, compared to August 2021.
According to StatCan’s latest national income report, the median post-tax income for Canadians is $66,800. At this rate, low to middle-income renters are definitely feeling the strain of the market.
So, why are rental rates in Canada skyrocketing? Let’s take a quick look at some of the key contributing factors.
With recent annual inflation rates (expected to be 7.0% as of August 2022), Canadians’ wallets are starting to feel the strain.
It’s no secret that inflation has caused a lot of grief for Canadians. Almost everything has been growing more expensive. Groceries, clothing, building materials, automobiles, gasoline, and more have become less affordable for the average Canadian. Unfortunately, increased rental prices seem to be par for the course.
The cost of rent generally correlates with the value of the property being rented. More expensive buildings generally come with a higher monthly rent.
According to Wowa’s latest housing market report, both commercial and residential properties have increased in value compared to last year. Despite the recent correction that the market has seen in September, property values are still high. This could potentially mean that apartment owners are passing their higher mortgage interest expenses onto their tenants.
The COVID-19 pandemic caused a lot of confusion in the market. Many Canadians lost their jobs, were forced to downsize, or are currently unsure of what the future holds. As a result, there have been fewer real estate transactions (people purchasing houses).
Based on Wowa’s report, the total number of real estate transactions in August 2022 was 38,310, compared to August 2021, which saw 50,876 real estate transactions.
Based on this data, it’s likely that many Canadians are postponing buying a home. Instead, they’re choosing to rent. This could mean an increased demand for apartment units and a reduced supply of apartments. Any time apartment demand increases and supply decreases, the cost of rent is going to go up.
Now that you have a better idea of why rent is increasing, let’s take a quick look at some of the ways that Canadians are responding and what you can do to make paying rent easier
1. Personal budgeting & cost-cutting
Creating a budget is crucial if you want to stay on top of your personal finances. With the cost of everything increasing, your finances are likely to be a bit tighter than usual. Unexpected expenses could easily affect your ability to pay rent on time.
I recommend sitting down and creating a simple budget sheet, detailing your monthly income, expenses, utility bills, and rent payment. This will ensure that you don’t overspend and that you have enough to pay rent.
2. Picking up a side gig
Picking up a side gig is a great way to increase your income by turning your free time into paid time. As an independent contractor, you’ll be able to work as little (or as much) as you want, pick your own hours, and earn upwards of $20 per hour or more.
3. Signing longer rental contracts
Most apartments offer a price break to tenants who agree to sign long-term leases. Signing an 18- to 24-month lease may allow you to save 5% or more on your monthly rent when compared to a 12-month lease.
4. Living with roommates
Living with roommates isn’t always easy, but it certainly makes things more affordable. Renting a larger 2 or 3-bedroom apartment and splitting the rent across with multiple roommates is one way to reduce your monthly expenses and stay afloat, despite the increase in rental rates.
According to Bloomberg, the Canadian housing market is predicted to fall by 25% by the end of 2023. This could result in lower (or at least more steady) rental rates.
At this point, it’s difficult to say for sure.
For now, I encourage you to do your best to stay on top of your personal finances and spend your money wisely.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his Wealth Awesome website.
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CTVNews.ca wants to hear from Canadians who are taking steps to mitigate rising prices amid a higher inflation rate.
If you live in an apartment, then you've more than likely felt the effects of the dramatically increased rental rates in Canada. Personal finance contributor Christopher Liew explores some of the key factors contributing to the increased rental prices in Canada, along with some of the things that Canadians are doing to cope with the current market.
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