Tighter Mortgage Rules Open Up Rental Market
It can be hard sometimes to focus on the positives that came out of the tighter mortgage rules that were put in place nearly a year ago. But in addition to the reason for the changes in the first place, helping curb household debt and prevent a housing bubble, there’s another positive that’s come of these rules. They’ve opened up the rental market, and helped clear up some of the inventory on the condo market, too. All in one fell swoop.
Investors know that the likeliness of successfully flipping a condo in today’s market is about as good as seeing the Toronto Maple Leafs win the Stanley Cup. Instead, to still ensure that they’re making a return on their investment, they are renting out those condo units and making even more of a return, as first-time buyers are holding off on purchases until they start to see prices come down, and until they can save up for their down payment.
“For the first time in a long time, we’re seeing rent levels grow stronger than resale and new condo prices,” said Shaun Hildebrand, senior vice president of Urbanation and former market analysis with the CMHC.
“What we’re seeing is investors who are recognizing that the real strength in the market is on the rental side now, not the resale side.”
And investors certainly are starting to realize that. The number of rental units on MLS grew by 19 per cent in the first quarter of this year, showing that investors see there’s a real opportunity to capitalize on this market.
And capitalize they can; the number of rental units isn’t the only thing growing – rental rates are too. Rent have increased by 10 per cent in the past two years, and are now seeing averages in the GTA of $1,856 per month.
But while those rents may sound high if you’re a renter, there is an upside. With more investors seeing the vast potential of the rental market, it’s also going to open up that market to more people; and at a time when more people are looking for rental units as they continue to hold off on their decision to buy.
Rent increases are also expected to start plateauing and maintaining the same levels that they’re seeing now, Hildebrand predicts, which could continue to keep the rental market open to even more people.