Rents are soaring in Canada, hitting a record-high of more than $2,000 per month in September and spiking into the $3,000 range in some hot markets, which has the potential of turning condos into cash-flow machines, especially in western cities east of Vancouver.
The average rent in Canada hit an all-time high of $2,043 per month in September, according to the latest National Rent Report from Rentals.ca and Bullpen Research & Consulting.
This is up 21.9 per cent from last year and up from $2,000 in August 2022.
“The completion of a number of new purpose-built rental apartments with higher rents, contributed to the significant annual rent increase,” the report noted.
In Greater Toronto, average apartment rents are up 31.2 per cent, year-over-year to $2,855 .In Greater Vancouver they rose nearly 30 per cent to $3,222.
Smaller centres weren’t spared: Kelowna’s average monthly rent in September for a one-bedroom home was $2,061, and average monthly rent for a two-bedroom was $2,555.
Calgary’s average rents were up 24.1 per cent year-over-year to $1,770; and rent for a two- bedroom Saskatoon apartment was up 12 per cent to an average of $1,215; Winnipeg saw a more modest 6.7 per cent annual increase to an average of $1,125 for a two-bedroom, while Edmonton’s average two-bedroom rent is now $1,362, up 9.4% from a year ago.
The higher rents, combined with a cooling of condominium prices in most of the country, has created a switch in the market, according to Re/Max.
Re/Max’s 2022 Canadian Condominium Report examined more than 120 communities in six major markets. The report found that condominium sales were down in the first eight months of 2022 in Vancouver and Toronto, but Calgary and Edmonton reported double-digit sales increases over the same period a year earlier,
“Buyers from British Columbia and Ontario continue to be active in Alberta’s condominium market,” Re/Max concluded, suggesting many of these buyers are purchasing condos in the province as rentals.
It makes sense: the average price of condo apartment is close to $800,000 in both Vancouver and Toronto, which makes it nearly impossible to generate positive rental cash flow, even with the highest rents in the country. Not so in Calgary, where the average condominium sells for $279,300 and, Re/Max estimates, can generate more than $1,800 per month, since condos generally have higher rents than apartment buildings.
A Vancouver or Toronto landlord, for example, could purchase three or even four condos in Calgary for less than the cost of one in their own city – and Alberta has no rent controls.
Rapid escalation of rental rates in Calgary has also prompted would-be renters to buy. Re/Max estimates, with the monthly rate for a two-bedroom condo apartment is now sitting at $1,891, up 19.7 per cent year-over-year, it is cheaper to own than rent in Alberta’s biggest city.
Such rental payments can be higher than the monthly mortgage cost of an average-priced Calgary condo, even when condo fees and today’s higher mortgage rates are factored in. But a recent search on Realtor.ca found more than a dozen Calgary condos, in good areas, priced at less than $175,000. Re/Max recommends areas such as Saddle Ridge, Panorama Hills, Currie Barracks and McKenzie Town, where sales of condominium apartments have been doubling year-over-year. Rental investors may also want to check out downtown condos, which can deliver higher rental demand and prices.
Another cash-flow potential is Saskatoon, where even new condos may sell for under $190,000 and the average rents have increased to more than $1,200 per month. In mid-October, there were 31 Saskatoon condo apartments listed at $125,000 or less on Realtor.ca.