Why are rental prices expected to keep rising in Ontario?

The Ontario rental market has changed much over the past few years, and the 2024 trends tend toward increasing rent prices. For landlords, property managers, and tenants, there are many reasons why this might be happening.

Royal York Property Management dedicates itself to the success of our landlords to ensure they achieve the maximum possible investment returns while meeting the needs of their tenants. Being rated number one in property management for six years running, Royal York Property Management assures property owners of the ability to relax and diversify their portfolios while professionally managing complexities.

Competitive in the Ontario landscape, the property management portfolio is strong and now includes 22,000 properties valued in excess of $10.1 billion in combined assets. In this blog, we will look at why the price of renting in Ontario shows no indication of slowing down and what that could portend for the future.

The Current Landscape  

Since 2016, the number of tenants in Ontario has considerably increased. The growth in population, shifts in housing preferences, and economic factors drive the demand. With increased tenants preferring to rent rather than buy, the demand for rental properties becomes stronger; therefore, so do the rental prices. Rental prices in Ontario shot up by 27% between 2016 and 2021, reflecting both supply-demand tightening and the overall cost of living. By September 2023, the average cost of rental units in Canada had reached a record high of $2,043 per month.

Contributing Factors  

Several key factors raise the price of rent in Ontario. One significant factor is population growth. Ontario continues to experience population growth because of immigration, urbanization, and many employment opportunities. As more individuals move into the province, there is an increase in demand for renting properties. This means that there is competition among tenants as landlords raise the prices of rental properties.

Another significant factor is the increase in operation costs for landlords. The increasing expenses, such as utilities, insurance, property taxes, and maintenance, are on a steady rise. To be able to cover these expenses and make a reasonable profit, the landlords increase the rental prices.

Houses in the Ontario market have also been on the increase of late. For the last four months, the home price has increased by 9%, which means an average increase of 2.3% each month starting from January. In addition, there has been an increase of 139% in listings and a 75% increase in unit sales. The changes have not affected the stability of the market as the interest rates have not changed, meaning things will continue to be normal unless the policies on interest rates change. The market for Ontario's houses is in its typical busy spring season.

Key Observations from April 2023 to April 2024 

The period from April 2023 to April 2024 gives insight into the trends that occurred within the rental market in Ontario. Within the given period, available rental properties in Ontario increased massively, ranging from 6,700 units in December 2023 to 11,500 units by April 2024. The influence of new developments and property owners capitalizing on the good market conditions introduced more options to tenants.

Contrary to expectations, the average asking rent remained relatively stable, which indicates that demand was sufficient to catch up with the increasing supply. In August 2023, average rents peaked at $3,110 due to the influence of rate increases and increased student enrollment.

Rents have shot up sharply amid the housing crisis in Ontario. In March, the average asking rent for a one-bedroom apartment in the province was $2,199, says Rentals.ca. The sharp increase is a sign of the never-ending turmoil that tenants face in securing affordable housing options. Ontario's rent increase guideline for 2024 is 2.5 percent.

Rental prices vary drastically from one city to another in Ontario. In city centers like Toronto, Mississauga, and North York, condo apartments demand higher rent—averagely at about $2,700 monthly—whereas detached homes could go for up to $5,000 monthly. In the relatively low-priced cities of Hamilton, Kitchener, Barrie, and Ottawa, rents are low. For example, Barrie has semi-detached houses and townhouses that rent for much cheaper rates. Its average rent went up by a notable 7.5% during that time, reflecting the growing interest it has garnered.

Among the top 20 Ontario cities, only half witnessed growth in average rent. Scarborough's growth was quite higher in particular, proving that location, amenities, and property type are indeed essential and real factors in rent fluctuations.

Predictions and Implications  

Looking forward, a number of predictions and implications for the Ontario rental market are evident. As the housing market bounces back, sales and prices are likely to go up, and the effects are going to ripple through and keep the rental market competitive. The unrelenting disparity in supply versus demand in the rental market will continue to drive rental prices ever upward. This, of course, means that both tenants and investors will need to be even more attuned to market performance and make even smarter decisions.

In summary, Ontario's rental market is dynamic, with prices increasing on the basis of population growth, growing costs of operation, and market forces. Understanding the trends, as a landlord, will be important to you to make proper decisions that optimize your investment returns.

At Royal York Property Management, we offer you property management and tenant placement to keep your rental competitive and profitable in this dynamic market. By keeping you updated and proactive, we have you going through the intricacies of the Ontario rental market, headed to long-term success.

Understanding the drivers of increasing rental prices is very important to making the right decisions in the competitive Ontario rental market. As a tenant, this is your opportunity to find a new home or, for an investor, explore opportunities. Knowing these trends will lead you through the market effectively and will allow you to make the best decisions for your needs.For more information on Royal York Property Management and our services, visit: royalyorkpropertymanagement.ca