How Low Will Rents Go? | Canada Real Estate

Summary

The video discusses the current challenges facing landlords in Canada, particularly in cities like Vancouver, Toronto, and Montreal. Rent prices are dropping due to an oversupply of small condos, a shift from Airbnb to long-term rentals, and a reversal in immigration trends. Economic pressures and a high number of purpose-built rental units further contribute to this trend. With a looming housing crisis and increased competition, landlords are struggling to maintain high rents, facing falling demand and rising vacancies. The video also touches on broader economic concerns, including potential political changes in the near future.

Takeaways

• 😀 Rents in major Canadian cities like Toronto and Vancouver are falling, particularly for smaller condo units.
• 😀 In the GTA (Greater Toronto Area), rents have dropped by 5.6% over the past year, with better deals available for new tenants.
• 😀 The overbuilding of small condos, particularly 'dog crate' units, has contributed to a supply glut in the rental market.
• 😀 Many new rental units being built are small and undesirable, especially compared to low-rise homes that are no longer being constructed.
• 😀 A significant number of condos, initially bought for Airbnb use, are now entering the long-term rental market due to stricter regulations on short-term rentals.
• 😀 There is an ongoing 'war' on Airbnb across Canada, especially in British Columbia and Ontario, pushing owners to rent out their properties long-term instead.
• 😀 Immigration trends are shifting, with fewer international students and temporary workers entering Canada, leading to less rental demand.
• 😀 A potential economic downturn could cause renters to downsize, move back home, or take on roommates, further reducing rental demand.
• 😀 Purpose-built rental properties are on the rise, offering larger units and favorable financing, which could further pressure rents down.
• 😀 Canada's housing crisis continues, but the focus is on the overbuilding of small condos while the construction of desirable low-rise homes has almost ceased since 2018.
• 😀 The government's focus on reducing the number of new immigrants could impact rental markets even further, as demand from newcomers is reduced.

Q & A

What is the main issue facing landlords in Canada, particularly in Vancouver and Toronto?

Landlords in Canada, especially in Vancouver and Toronto, are facing falling rents, oversupply of small condos, and increasing competition from other rental sources like Airbnb transitioning to long-term rentals. This is causing a difficult market for landlords hoping to achieve higher rents.

Why are rents falling in these major Canadian cities?

Rents are falling due to factors such as an oversupply of small, low-quality condos, increasing numbers of units coming from Airbnb transitioning to long-term rentals, and a decrease in the demand driven by changes in immigration and the overall economy.

How much have rents decreased in the Greater Toronto Area (GTA) over the past year?

Rents have decreased by 5.6% in the Greater Toronto Area (GTA) over the course of the last year.

What is causing the housing crisis in Canada despite the rental market downturn?

The housing crisis in Canada is caused by a lack of supply for low-rise homes, such as houses, townhouses, and semis. The construction of these homes has significantly decreased since 2018, while the market has been flooded with small, subpar condos that are primarily built for rental purposes.

How are new rental units affecting the market for landlords?

New rental units, particularly small condos and purpose-built rental buildings, are entering the market, which increases inventory and intensifies competition. Landlords are offering promotions, such as free rent for several months, to fill these units, which in turn pushes rents down.

What role does Airbnb play in the rental market in Canada?

Airbnb properties, particularly in British Columbia, Ontario, and Quebec, are contributing to the oversupply of rental units as many hosts are now transitioning to long-term rentals due to increased regulation and penalties for violating Airbnb laws. This shift adds more inventory to the rental market, putting downward pressure on rents.

How is immigration impacting the rental market?

Immigration is expected to decrease, with a decline in temporary workers and international students, which reduces the demand for rental properties. Furthermore, the government's potential future reduction in the number of permanent residents could lead to even fewer newcomers seeking rental accommodations.

How is the state of the economy contributing to the rental market issues?

As the economy worsens, more people are finding it difficult to afford rent, leading them to move in with roommates or back home with family. This results in more empty units and further downward pressure on rental prices.

What are purpose-built rental units, and how are they affecting the market?

Purpose-built rental units are apartment buildings specifically designed for rental purposes, as opposed to condos and strata properties. They are being constructed with more favorable financing options and larger unit sizes, and when these buildings are completed, they increase rental inventory and intensify competition, pushing rents down.

What challenges will landlords face in the future of the rental market in Canada?

Landlords will face challenges such as an oversupply of rental units, reduced demand due to slower immigration, economic difficulties causing tenants to move out, and competition from purpose-built rental developments. These factors will continue to push rents down and make it more difficult for landlords to maintain high rental prices.