New year, no vacancy. Renters in cities across Ontario will spend another year struggling to find rental housing as prices continue to rise in the face of tight market conditions.

In 2019, the vacancy rate was 1.6 percent and it will likely drop further through 2020 to a near record low of 1.5 percent, according to Central 1 Credit Union economist Edgard Navarrete. For context, the vacancy rate for Ontario’s rental market averaged 2.6 percent between 1991 and 2018.

In his 2019-2022 housing forecast published at the end of 2019, Navarrete noted that the province has seen a substantial uptick in completed new rental units over the last three years. Through the same 1991 to 2018 period, the average number of new rental units added to the market was 1,500. From 2017 to 2019, the average increased to 7,000 units.

The trouble is that increase still doesn’t satisfy the demand for rentals in some of the province’s most competitive markets, especially Toronto, which is said to have the worst rental supply deficit in Canada.

“Government investments in rental housing will continue to add to the rental universe but expect [the province’s] rental vacancy rate to remain stubbornly lower than the long-term average due to continued strong demand from immigrants settling in Ontario and existing renters opting to remain in rental longer until they have a sufficient down payment to qualify for a mortgage loan,” wrote Navarrete in the Central 1 Housing Forecast.

Unfortunately, the main takeaway here for Ontario renters is monthly rents will continue to climb above inflation as long as this sharp disparity exists between rental supply and persistent demand. Navarrete singles out Toronto, Ottawa-Gatineau, London, Kitchener-Cambridge-Waterloo and Hamilton as markets where rental prices will log especially steep increases and bidding wars will keep intensifying. These cities will feel the strain on their rental markets particularly acutely because they are set to absorb the most new residents to the province.

There is hope for a rental unit supply uptick in the next few years, but for those looking for a new rental this year, it’s unlikely to offer much relief. The provincial government under Premier Doug Ford rolled back the rent control measures introduced by the Wynne Liberal government just a couple years earlier. With more flexibility to price rental units in response to market demand, investors are more likely to see condos as a solid long-term moneymaker and purchase units to add to the rental market.

These investor-owned condos are known as the “secondary rental market” since they are not built for the sole purpose of being added to the rental pool. Purpose-built rental units are known as the primary rental market.

The caveat is that the positive market changes this policy shift from the Ford government intended to inspire won’t be felt for at least a few years.

“If we see a large number of investors entering the market today, with the average completion time of high-density housing such as condo apartments anywhere from two to three years from the time shovels hit the ground, it wouldn’t be until after 2022 when the increased rental market supply will alleviate some of the pressures from the primary rental market,” wrote Navarrete.

There was a decrease in Canadian construction investment in October, the latest month of data released by Statistics Canada.

The agency says that total investment in construction was down 0.5% month-over-month to $15.5 billion with the residential sector down 1% to $10.6 billion while the non-residential sector gained 0.5% to $4.9 billion.

Residential construction investment was down in 6 provinces with Ontario posting the largest decrease ($129.6 million), its first decline for four months, while BC posted its first gain (up 5.3% to $1.9 billion) after 4-monthly decreases.

The decline for residential to $5.3 billion was the result of a 1% decline for single-family units and a 0.9% decline for multi-family.

Non-residential gains
Investment in the non-residential sector rose 0.5% to $4.9 billion in October with the commercial component leading with a 1.1% increase to $2.9 billion, largely due to increases in Ontario (2.0% to $1.0 billion) and British Columbia (3.8% to $546.9 million).

There were declines though for the industrial (-0.3% to $902.4 million) and institutional (-0.4% to $1.1 billion) components in October.

Canada’s housing market improved for the 9th month in a row in November, with strong gains in both sales and price growth – a trend that’s expected to continue into 2020, according to the Canadian Real Estate Association.

The latest data reveals the number of homes trading hands nationwide rose 0.6% from October levels, and 11.3% from 2018. Meanwhile, the number of newly-listed homes continues to shrink, down -2.7%; that’s increasingly putting the squeeze on buyers and pushing more local markets into sellers’ conditions, which helped drive the national average sale price to $529,000, an increase of 8.4%. That indicates the market has recovered by 20% from the six-year low recorded this February, though it still lingers below the 2016 – 2017 peak by 6 – 7%.

The MLS Home Price Index, which measures the price benchmark for homes, also rose 0.8% month over month and 2.6% year over year.

Strong Housing Market Growth to Continue in New Year
It’s a dynamic housing market participants should get used to, as CREA has updated its forecast for this year and next, calling for sustained growth trends across the country over the long term; a total of 486,800 home sales are expected to be logged for 2019, up 6.2% from last year. Sales were stronger than expected in the second half of the year, while months of inventory continued to brush rock bottom (with the Prairies stripped out, there’s just a 0.1 month of supply of available homes for sale, a 15-year low). The average home price is expected to clock in at just over $500,000, up 2.3%.

CREA forecasts a total of 530,000 units will sell in 2020, an increase of 8.9%, while prices are expected to surge 6.2% to an average of $531,000.

It expects that the same regional price trends that defined the 2019 market to largely continue throughout the new year, namely uneven price growth between the west- and east-end provinces, overall slower performance in the Prairies, and Ontario and BC making up the bulk of activity.

Sales on the Rise in Most of Canada’s Major Markets
CREA reports that November home sales were up in nearly all of Canada’s major markets, with demand on the rise for British Columbia and the Greater Toronto MLS listings, which helped offset declines in Calgary.

According to CREA President Jason Stephen, markets that continue to struggle with sales volume are those that have been disproportionately affected by the OSFI federal mortgage stress test, which has had an overcorrecting effect in cities that had largely balanced or buyers’ conditions before it was implemented.

“Sales continue to improve in some regions and not so much in others. The mortgage stress test doesn’t help relieve the ongoing shortage of housing in markets where sales have improved, and it continues to hammer housing demand in markets with ample supply,” he states.

Check out how price growth differed in Canada’s major markets in the infographic below:

Supply-and-Demand Gaps Growing in Hottest Cities
As has been the long-term trend, uneven supply of housing across Canada is also contributing to mixed price growth, as some locales face a tight supply-and-demand crunch, while others sit on a plethora of available listings.

Gregory Klump, CREA’s chief economist, says that as long as these imbalances persist, prices will continue to grow in the nation’s largest cities.

“Home prices look set to continue rising in housing markets where sales are recovering amid an ongoing shortage of supply,” he says. “By the same token, home prices will likely continue trending lower in places where there’s a significant overhand of supply perpetuated in part by the B-20 mortgage stress test that continues to sideline home buyers there.”

As a result of higher sales volume and declining new listings on a monthly basis, the sales-to-new-listings ratio (SNLR) for Canada as a whole hit 66.3% in November – deep into sellers’ market territory, and well above the long-term average of 53.7%. This ratio, which measures the level of buyer competition in a market, is calculated by dividing the number of home sales by the number of new listings brought to market over the course of the month. A ratio between 40- 60% indicates a balanced market, with below and above that threshold signalling buyers’ and sellers’ conditions, respectively.

Conditions Uneven Between East and West
According to this measure, just over half of all local markets were balanced in November, with Alberta and Saskatoon remaining largely over supplied, with the opposite occurring in Ontario, BC, and the Maritimes.

The overall months of inventory – a measure of how long it would take to sell off all available homes for sale – sank to 4.2 months, the lowest it has been since the summer of 2007, and below the long-term average of 5.3 months. As has been the case, it remains higher than usual in the Prairies and Newfoundland and Labrador, while below typical levels in Ontario, Quebec, and eastern markets.

Overall, conditions remain balanced in BC, including on the Vancouver MLS, though CREA warns that markets within the province are primed for price growth and buyers rebound in solid numbers.

Price Gains by Province
BC: While year-over-year prices remain down in both Greater Vancouver and Fraser Valley, the pace of those declines is slowing, down -4.6% and -2.9%, respectively. However, the remainder of BC’s markets are on an uptick; prices rose 1.4% in the Okanagan, 1.5% in Victoria, and 2.9% elsewhere on Vancouver Island.

Prairies: Price growth remains subdued across the board, down -2% in the Edmonton, Saskatoon, and Calgary real estate markets, while falling -5.5% in Regina.

Ontario and Eastern Canada: According to CREA, “… price growth has re-accelerated well ahead of overall consumer price inflation across most of the GGH. Meanwhile, price growth in recent years has continued uninterrupted in Ottawa, Montreal, and Moncton.”

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity this year and for 2020 via the Multiple Listing Service (MLS) Systems of Canadian real estate boards and associations.

Evidence suggests housing activity will continue to improve into 2020, with prices either continuing to rise or accelerating in many parts of Canada. Additionally, the Bank of Canada is widely expected to not raise interest rates in 2020.

Mortgage interest rates have declined, including the Bank of Canada’s benchmark five-year rate used by Canada’s largest banks to qualify applicants under the B-20 mortgage stress-test.

Under the $1.25 billion First-Time Home Buyer Incentive, the federal government contributes a portion of the home purchase price in exchange for an equity share of the home’s value.

Recent national sales trends have improved by more than expected over the second half of 2019 while new listings have fallen. These trends have caused many housing markets to tighten, which has sharply lowered the national number of months of inventory. In November 2019, this measure of the balance between supply and demand hit its lowest level since mid-2007.

Excluding the Prairies together with Newfoundland and Labrador, the combined number of months of inventory for the rest of Canada is at a 15-year low – just 0.1 months above the lowest level on record – and continues to fall.

The number of homes available for sale in these provinces, which represent over 80 per cent of national activity, is at a 15-year low. This is anticipated to support solid home price growth in 2020.

National home sales are projected to recover to 486,800 units in 2019, representing a 6.2 per cent increase from the five-year low recorded in 2018.

The small upward revision compared to CREA’s previous forecast reflects a stronger than anticipated uptick in activity in recent months in B.C., Ontario, Québec and Nova Scotia.

This represents the return of activity to around its 10-year annual average. On a per capita basis, the forecast for national sales this year is tied with 2008 and 2013 for the lowest since 2001.

British Columbia was the only province to weigh on the national sales figure in 2019, with sales for the province this year finishing 2.3 per cent below where they stood in 2018. Ontario and Québec provided most of the improvement in sales this year, with activity expected to be up 9 per cent and 11 per cent respectively.

The national average price this year is on track to rise by 2.3 per cent on an annual basis to just over $500,000.

In line with the balance between supply and demand across the country and trends earlier in the year, average prices in 2019 are expected to be down in the three westernmost provinces together with Newfoundland and Labrador, with robust gains in Ontario, Québec and the Maritimes.

National home sales are forecast to rise by 8.9 per cent to around 530,000 units next year. While sales are expected to trend higher, most of this annual increase in 2020 reflects a weak start to 2019 rather than a significant change in sales trends over the forecast horizon.

Of the forecast 40,000+ sales increase for 2020, British Columbia and Ontario are expected to contribute close to an additional 15,000 transactions each, while Québec and Alberta are anticipated to contribute 8,000 and 2,000 additional transactions respectively.

The national average price is forecast to rise by 6.2 per cent in 2020 to $531,000. Average price trends across Canada in 2020 are generally expected to resemble those in 2019, with small declines in Alberta, Saskatchewan and Newfoundland and Labrador, and solid gains in Ontario, Québec and the Maritimes.

In British Columbia, the average home price is expected to rebound next year following this year’s decline. In regions with supply shortages, price gains may exceed forecast levels should shortages become more acute than anticipated.

Toronto’s low income renters should soon learn how they can access a portable rental housing benefit following the announcement of what amounts to a $1.4 billion deal co-funded and agreed on by the province and the federal government.

“Today’s announcement is another great example of how governments are working together to help our residents,” said Mayor John Tory, in a statement released prior to a Thursday morning press conference. “Making sure people have access to affordable housing is a top priority for me as Mayor and that requires the cooperation and support of other levels of government.”

Ontario’s program is expected to help at least 300,000 low-income renters, a federal target outlined in a bi-lateral agreement agreed on under the previous provincial government, dated April 2018, and was considered a significant victory for advocates who fought to have a benefit as part of the overall National Housing Strategy.

Priority will be given to households eligible or on a “social housing waiting list and households in financial need living in community housing. This includes survivors of domestic violence and human trafficking, persons experiencing or at risk of homelessness, Indigenous persons, seniors and people with disabilities,” a government release states. It did not contain specifics on when people could apply and exactly how the program would unroll.

Thursday’s announcement was made in front of a Toronto Community Housing building at 150 River Street, near Dundas Street East, and part of the newly revitalized sections of the Regent Park neighbourhood. That building contains 125 rent-geared to income units and 33 units of what is defined as affordable housing and whose residents were chosen through something of a lottery, said TCH spokesperson Bruce Malloch.

People who wanted to live in those affordable units, two and three bedroom apartments costing $1,194 and $1,331 respectively, submitted their names into a random draw and if selected their applications were considered.

The maximum household income for the two-bedroom units was $57,312 and the $63,888 for three-bedroom units.

Malloch said more than 1,800 applications were made for the two-bedroom units and more than 1,600 applications for the three-bedroom apartments and residents are starting to move in this week.

What constitutes affordable housing is typically based around numbers reported out by the Canada Mortgage and Housing Corporation, which tracks what people are paying for occupied purpose built rental units. Condominiums are considered a separate category and are not included.

Housing is considered affordable if it matches or is lesser than the average of those occupied purpose built rentals, which are subject to rent control. In Toronto landlords can charge whatever they want for emptied out units and any units occupied after mid-November 2018 have no rent controls at all.

Across Old Toronto, the average cost for a two-bedroom apartment in 2018 was $1,829 and a three bedroom was $2,473, according to the most recent CMCH rental market housing report for the Greater Toronto Area.

Research firm Urbanation reported that average rents for newly leased or available purpose built rental units was at about $2,515 per month, in an October news release. The release did not include unit size.

If you’re struggling to find a place to rent in Mississauga, you should prepare for a challenging market marked by even higher prices in 2020.

In fact, the recently-released Rentals.ca December 2019 Rent Report, produced by Rentals.ca and Bullpen Research & Consulting, suggests that rents could climb 8 per cent in Mississauga next year.

When it comes to significant increases, Mississauga leads the pack. Other cities where rental rates are expected to increase include Toronto (7 per cent), Montreal (5 per cent), Ottawa (4 per cent) and Vancouver (3 per cent).

Rents in Calgary and Edmonton could drop 1 per cent, according to the report.

The report predicts that average monthly rents for Canada overall will increase by 3 per cent in 2020.

As for where rates stand right now, the average rent for Canadian properties in November 2019 was $1,918 per month, an increase of 9.4 per cent annually.

In November of 2018, the average rental rate was $2,232 for all property types listed on Rentals.ca in Mississauga. According to the report, that rate increased to $2,405 for November 2019, an increase of 10.2 per cent annually.

Overall in 2019, the average rent was $2,504 per month.

Mississauga finished sixth of 34 cities listed for average monthly rent in November for one-bedroom units at $1,934 and fifth for a two-bedroom at $2,416.

Toronto remains the priciest city for renters looking for a one-bedroom home, with the average monthly rent sitting at $2,314. Vancouver has the most expensive average monthly rents for a two-bedroom, topping the $3,000 mark at $3,058.

What prices can Mississauga tenants expect in 2020?

The report says the linear forecast calls for the average rent in 2020 to surpass $2,600, but Rentals.ca and Bullpen forecast that December 2020 rent will be $2,585 per month on average, an 8 per cent annual increase.

The report says this forecast is a slight moderation from the correct 10 per cent annual growth forecasted from December 2018.

“Mississauga will continue to move parallel to the former City of Toronto with prospective renters fleeing Toronto for less expensive units or larger properties,” the report reads.

The good news is that the price increases could, in time, be modified by an influx in new rental inventory.

The report says the impact of the mortgage stress test has started to fade and developers and investors are looking to increase rental supply to offset the increase in rental demand. At a time when fewer people can afford to purchase homes (and when more and more people are moving into the GTA), developers are working on developing more purpose-built rental housing—and that’s good news for tenants.

At the end of the third quarter, the Canada Mortgage & Housing Corporation reported that almost 72,000 rental units were under construction in Canada, the highest rate in over 30 years.

The majority of listings on Rentals.ca are rental and condominium apartments and the chart below looks at the average rent and the annual change in average rent for a select number of Canadian municipalities (and former municipalities prior to amalgamation) in November 2019.

Average monthly rent for Mississauga rental and condominium apartments only increased 7 per cent year over year.

According to the report, Hamilton and Scarborough led the pack with year-over-year rent growth of 25 per cent and 23 per cent, respectively for apartments with rental or condo tenure.

On a provincial level, Ontario had the highest rental rates in November, with landlords seeking $2,339 per month on average (all property types), up from $2,334 in October, and 9.1 per cent annually from $2,144 in November of 2018.

The report says the annual increase in rents is supported by some of the smaller municipalities such as London, Hamilton, Kanata, Burlington, and Kitchener, which are all experiencing double-digit rent growth when considering all property types.

The report also notes that developers are looking to cater to more affluent renters, including those shut out of the ownership market by increasing prices, younger renters choosing to be tenants for lifestyle reasons, and boomers and empty-nesters trading down from a larger dwelling.

“After years of focusing on the ownership housing market,” said Ben Myers, president of Bullpen Research & Consulting, “The media has focused more attention on the rental market as the mortgage stress test, expanded rent control, changing Airbnb legislation, rapid population growth, and record rental housing construction continues to disrupt the balance between supply and demand nationally. We expect the market to continue to be undersupplied overall in Canada in 2020.”

Some moderation is expected in 2020.

“After two years of unprecedented rent growth, we expect some moderation in 2020,” said Matt Danison, CEO of Rentals.ca. “There should be some supply relief in the Greater Toronto Area in 2020, but Rentals.ca and Bullpen expected average rental rates for all property types in Toronto and Mississauga to increases by 7 per cent to 8 per cent next year.”

The National Rent Report charts and analyzes monthly, quarterly and annual rates and trends in the rental market on a national, provincial, and municipal level across all listings on Rentals.ca for Canada.

The Bank of Canada (BoC) announced today that it would keep the overnight rate at 1.75%.

The Bank Rate is correspondingly 2% and the deposit rate is 1.5%. The BoC has maintained the current overnight rate since last October, when it was raised from 1.5%.

No one really expected the central bank to raise rates, but there was speculation that the rate would drop back to 1.5%, even though a recent survey indicated a “near certainty” of a rate hold, This lack of movement makes Canada somewhat of a holdout among other central banks around the world that are dropping rates to help their local economies in an uncertain global economic climate.

“There is nascent evidence that the global economy is stabilizing, with growth still expected to edge higher over the next couple of years. Financial markets have been supported by central bank actions and waning recession concerns, while being buffeted by news on the trade front. Indeed, ongoing trade conflicts and related uncertainty are still weighing on global economic activity, and remain the biggest source of risk to the outlook,” the central bank wrote.

Growth in Canada slowed as expected in the third quarter of 2019 to 1.3 percent, and stronger wage growth led consumer spending to a moderate expansion. Housing investment was also a source of strength, supported by population growth and low mortgage rates. Consumer spending and housing activity are important sources of resilience in the Canadian economy, and the BoC indicated that it would continue to be on alert for any financial vulnerabilities that may affect the household sector.

“Future interest rate decisions will be guided by the Bank’s continuing assessment of the adverse impact of trade conflicts against the sources of resilience in the Canadian economy – notably consumer spending and housing activity. Fiscal policy developments will also figure into the Bank’s updated outlook in January,” the BoC wrote.

The overnight rate is the interest rate at which major financial institutions borrow and lend one-day (or “overnight”) funds among themselves; the Bank sets a target level for that rate. This target for the overnight rate is often referred to as the Bank’s policy interest rate.

Changes in the target for the overnight rate influence other interest rates, such as those for consumer loans and mortgages. They can also affect the exchange rate of the Canadian dollar.

The next interest rate announcement is January 22nd.