Royal LePage released its 2024 Canadian Renters Report this June. It provides an extensive overview of the current rental market trends and renter sentiments across Canada. The report highlights key trends that real estate professionals should be aware of, including challenges renters face, housing affordability and the transition to home ownership.

Key National Insights

Home Buying Plans

The report reveals that 27% of Canadian renters plan to buy a property within the next two years. This intention is particularly strong among younger renters, with 40% of those aged 18-34 expressing a desire to transition from renting to owning. Despite this, the majority (69%) of renters do not plan to purchase a home soon, with 54% (and 61% of under 34s) citing insufficient income as the biggest barrier.

Challenges in Affordability

A significant number of renters face affordability issues. Before signing or renewing their leases, 29% of renters considered buying a property, but 41% lacked a sufficient down payment. This difficulty in saving for a down payment is compounded by ongoing high borrowing costs and competition in the housing market. About one-third of renters continue to rent while saving for a down payment, and many are waiting for property prices (30%) and interest rates (33%) to decrease.

High Rental Costs

Rental costs take up a large part of renters’ incomes. Nationally, 16% of renters spend more than half of their net income on rent. This issue is particularly significant in British Columbia, where 25% of renters face this burden, significantly above the national average of 16%. Vancouver and Toronto, being among the most expensive markets, see 27% and 19% of renters respectively spending more than 50% of their income on rent. In contrast, this figure drops to 10% in Montreal.

Down Payment Expectations

For those planning to buy within the next two years, half expect to have a down payment of less than 20%. Respondents plan to leverage various sources for their down payment, including personal savings (53%), the First Home Savings Account (46%), and the Home Buyer’s Plan (29%).

Relocation as an Alternative

Affordability pressures are causing renters to consider relocating. 44% of those who would like to purchase in the next two years believe they will be able to afford a home in their current city, but 37% don’t think this is possible. 40% are willing to move more than 50 kilometres to find an affordable property. This trend is more pronounced in high-cost regions like Toronto, Montreal, and Vancouver, where many are contemplating moves to more affordable areas. Real estate professionals should be aware of this trend and may wish to monitor properties and markets further afield.

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Regional Highlights

Atlantic Canada

In this region, 22% of renters plan to buy within the next two years. Rental demand in cities like Halifax has surged due to population growth and migration during the pandemic. Renters here also face high costs, with 24% spending more than half of their income on rent. New rental property construction has increased, but permitting and approvals remain slow and costly.

Quebec

Known for its high percentage of renters, Quebec sees 22% planning to purchase homes in the next two years. Montreal’s rental market is tight, with low vacancy rates and rising rents. Renters in Quebec often indicate they are waiting for interest rates (41%) and property prices (42%) to decrease as reasons for delaying home purchases.

Ontario

Ontario’s rental market is nuanced and challenging. In Toronto, 31% of renters plan to buy a home within the next two years, although many struggle with saving for a sufficient down payment. Toronto’s rental market remains tight, especially for family-sized units. High rents continue to eat up significant percentages of household income, with 18% spending more than half of their income on rent.

Manitoba and Saskatchewan

Although challenges for renters are less extreme, they are still significant. About 36% plan to buy a home in the next two years, but 9% spend more than half their income on rent.

Alberta

In Alberta, 27% of renters plan to purchase a property within the next two years. There is increased demand in the rental market, partly due to migration from higher-cost-of-living provinces like Ontario and British Columbia. Multi-bedroom rentals are particularly in demand.

Market Dynamics

High rental costs and low vacancy rates are prevalent across the country. The Canadian Mortgage and Housing Corporation (CMHC) reported an 8% increase in the average rent for a two-bedroom unit nationally over the previous year, with vacancy rates at 1.5% for purpose-built rental buildings and 0.9% for condominium apartments. This situation is worsened by Canada’s acute housing shortage and high mortgage rates, which have pushed more households towards the rental market.

Proposed Government Actions

The 2024 federal budget includes the Canadian Renters’ Bill of Rights, which proposes standardized lease agreements and better reporting of rental payment history to improve credit scores. There is also a push to increase the supply of purpose-built rental properties and create affordable housing options.

Future Outlook

Real estate professionals should be aware there is interest in homeownership among renters, especially younger demographics. However, financial barriers and high market competition are likely to continue delaying this transition, unless suitable options are found. Understanding these dynamics and the regional variations in rental markets can help professionals better serve their clients and anticipate future trends in both the rental and home ownership sectors.