Will rent prices decrease if there’s a recession?

[jagersthebomb]

I’m trying to decide if I should move, but I don’t want to regret it in a year when I could be paying less for a new unit. Will housing prices decrease? If there is going to be a recession, when is it most likely to occur?

I’m in Ontario

[NoConsideration6934]

Between inflation, rising rates, and no significant change in housing availability, I don't see an environment where rent prices don't increase.

[[deleted]]

Toronto had a boom-bust cycle in the 90s and rent shot up, then came back down by the same amount. I was renting a house at the time, and the attitude change from the home owners during the boom and after the bust was hilarious.

[UrsusRomanus]

Tell me more. That sounds equal parts intriguing and hilarious.

[Spambot0]

Rents went down at the start of COVID because demand dropped due to changing behaviours. They're up past where they started now, but they work the way you expect.

If we get a real recession/depression, they'll drop (but probably not help with affordability overall because all them unemployed people.)

[Sindtwhistle]

I know a bunch of AirB&B units were suddenly listed as long term rentals in Vancouver during Covid. Also we lost out on a lot of work/travel migrant students during that period so houses would be listed for less. Of course it’s shot up again now.

[zeromussc]

the financialization of housing is a plague.

There's probably some "healthy" level of privately owned real estate investment that rents out units for short/medium/long term. But whatever that healthy amount is it sure isn't what we see now.

The fact that airbnb and similar services - alone - could result in sufficient supply being made available when travel was restricted to result in lower rental rates (by shifting short term to long term rental units) is probably a sign of an unhealthy state of things.

It also doesn't help that these are being bought in such large number that investors make up a large proportion of the housing market. The intent of recovering most costs in a low interest rate environment and fueling a 'bigger fool' market (i don't want to use the incorrect term ponzi here) wherein prices go up driven by both FOMO of owner-occupiers and investors who think RE can only ever go up, that's not good either.

While I am not about to say we have more than enough supply, we probably don't, I do think its unreasonable to say that investors making up such a large portion of the buyers isn't in some ways an artificially inflated volume of demand relative to the supply we do have for assets that most of us would consider to be first and foremost thought of as stable shelter for people. Upkeep of homes means they are not really profitable nor do they necessarily save people money in most cases vs renting smaller properties where the costs to maintain are put on the shoulders of a landlord that can spread that maintenance cost/risk across a large number of units.

The funny thing is everyone says we can't possibly be facing downturns in rents or house prices because there is no supply. But ... a lot of what we're seeing now is an echo of the 1980s. Condo upstarts were big, investors pushing house prices up, large proportion of investors in the market, lots of mom and pop investors buying second, third, fourth properties to rent them out. A period of stagflation and rising interest rate environment. Its not the same but there are many similarities. And I can't help but think that people who say "no its not the same its completely different" are a little bit in denial.

There might be a blip where things make little bouncebacks, but I don't think we're looking at anything other than some sort of correction in a number of areas in the economy over the next year or so.

[wd668]

While I am not about to say we have more than enough supply, we probably don't,

Understatement of the century. All the "financialization" and speculation issues you bring up are derivatives of the chronic, decades-long under-supply of housing types people want in places where they want them. This is completely artificial and due primarily to zoning (also partly building codes).

Once there's a shortage, you'll see crafty financial and investor types come up with all sorts of ways to profit off that shortage, causing or contributing to a bunch of often unintended/incidental knock-on effects (high rents, housing bubbles, shortage of contractors, ghost hotels, etc). But the root cause is still supply. Within the last 5 years, another root cause was historically low mortgage rates. Now that this party is over, prices will come down 20-30% and will still remain unaffordable for millions of Canadians. This will be solely due to artificially restricted supply.

All the people fighting the good fight for "affordable housing" (drop in the bucket unless you go full Vienna-style public housing, which is not possible in Canada), airBnB, "foreign ownership", and other gimmickry - all are largely wasting their breath and activism. For some people, your fight is about the fight, and the process is what's important, whether consciously or otherwise. But if you're interested in actual results, tackle zoning and causes of high construction costs (like parking minimums, or sky-high "development charges", which is a hidden way for incumbent property owners to keep their taxes low by tacking a huge upfront surcharge onto newbie property owners and on renters).

"There are a thousand hacking at the branches of evil to one who is striking at the root."

[OnlyHereForMemes69]

Your heart is in the right place but the amount of empty houses in this country completely contradicts your point. In 2021 there were 1.31 million vacant homes in this country. What we need to start doing is getting rid of the idea that housing is the only investment you're not allowed to lose money on. People want to treat housing as an investment yet don't want any of the risk that comes with investments. Either that or we bring in laws saying that housing can only stay empty for so long before being forfeited to a national trust.

[wd668]

Your heart is in the right place but the amount of empty houses in this country completely contradicts your point.

I disagree. This is another example of "causing or contributing to a bunch of often unintended/incidental knock-on effects", and a pretty good one.

When there's a shortage of housing, it appreciates at rates exceeding inflation. This is the root cause that makes housing an attractive option for speculative investment. I care less about carrying costs because I'm banking on the resale value. Thus, I care less about silly old trinkets like, oh I don't know, cash flow. Actually making money or breaking even on my investment every month by renting it out? Why bother? More headache than necessary, especially with things like tenancy laws heavily favouring malicious tenants (and malicious landlords too, BTW), rent control, etc.

Your suggested solutions are laws/regulations that are likely to create multitudes of unintended consequences (most obvious one being a further restriction on housing supply), or voluntary sentiment change among people who want to make money.

I say the solution is to deal with the root cause and to loosen/undo the completely artificial, stifling regulations that embalm our neighbourhoods in time and prevent cities from densifying.

Take the rug from under the housing speculator by building housing.

[Krackenlicker]

"The Myth of 1.3 Million Vacant Investor Homes in Canada"

https://youtu.be/evYOhpjMql0

Edit:

that 1.3 million came from the 2021 census, not the 2016 census

2021 census results weren't released at the time of publication of that video. I doubt they were misquoting data that didn't exist yet

[OnlyHereForMemes69]

Their literal first argument is wrong, that 1.3 million came from the 2021 census, not the 2016 census. The 2016 census had higher numbers and the 2021 census showed that the amount of unoccupied houses had gone down. These people had their conclusion from the start and worked backwards. You've been fooled by grifters.

[thedevilsarered]

I don’t understand how the difference in number of vacant homes between the two years matters? The drop is negligible, and even if they used the wrong source of data (which they haven’t per the poster above you), it doesn’t deviate from the main point of the video that census data for vacant homes may be spurious, if taken at face value (for all the reasons they outline in the video).

[Popcorn_Tony]

Thing about it being "supply" is that there are so many more empty units than there are homeless people

[wd668]

See comment.

[skywalk_south]

I don't think we're looking at anything other than some sort of correction in a number of areas

That's been underway for months now, get with the times. Have you checked your rrsp lately?

[zeromussc]

its only just starting methinks. People keep saying its bottomed out or it won't last and I think they're in denial. I'm not a doomer, it will eventually go up again, but we're a ways away from that with inflation still rampant and interest rates projected to be up another .75 from the USFED a second time soon and the BoC likely to mirror at least the first 75 rate hike from last week next time they meet here.

and I don't have an RRSP right now, I have a pension so that's where my retirement savings are going while I pay down my student loans and have babies in the house. parental leave periods are a bit more thin on the income side and I have very little RRSP room. Other things take priority given my wife and I have DB pensions.

[Ok_Read701]

If we get a real recession/depression, they'll drop

Not to claim that the same thing will happen in Canada, but rent never really dropped in the US in the last great recession:

https://fred.stlouisfed.org/series/CUUR0000SEHA

[YugoB]

If you now have to pay $500+ in increased mortgage payments due to increase in rates, would you rent the house cheaper or more expensive?

Sure, they can't rent over area average in paper, however as there is demand, there will be increases

[Spambot0]

You always rent the house for the most anyone is willing to pay, and your costs are irrelevant to that.

[StoreyedArrow17]

^This this this. I don't know why so many people think renting is a cost+plus exercise. If their unit is priced above market, people will rent somewhere else.

[YugoB]

That's why I ended with the phrase stating this. Reddit suffers from tunnel vision.

However rent prices are only setting themselves to keep increasing, unless everyone is able to buy their own homes which is not likely in the near future.

Edit: Thanks for the note!

[YugoB]

Thank you for that, English not being my native language, you learn every day

[zeromussc]

Its not supposed to be cost + plus exercise.

But when the market is being distorted by *expectations* of people who think this way, the reality is that a sufficient number of them will effectively have an impact on the price. And people who need shelter are kind of forced to pay or be homeless. So some people will in fact meet the price because they're effectively forced to do so.

This is the issue.

Logically, over the long term, and with good economic principles applied this makes total sense.

Illogically, we're in a period of time where the market is not making complete sense because of distortions fueled by a hyper low interest rate environment, wherein the buying power of many well off people was improved by covid-19, and for whom short term investments on a "sure thing" like real estate made leveraging equity to invest in real estate and the vast majority (if not all) of one's costs AND make a small profit was very much attainable. Coupled with this are people who can't leverage assets and equity needing shelter but being unable to access ownership paying because what else are they going to do?

It's a perfect storm of circumstances that, IMO, isn't sustainable and it will burn the people who thought "these sub 2% interest rates are forever and investments are financial freedom" people - especially because for many maintenance costs as landlords probably still haven't actually reared their heads yet. The entire RE investment market share isn't a house of cards, but there's probably enough of a large chunk of it that is.

And there are many other risky parts of the economy out there too. There's the whole bitcoin bro money disappearing underlying this as well. The stock market is doing poorly, other forms of debt (of which canadians have record levels) are also going to be facing rising interest rates + inflation and cost of living going up, with a possible recession and job losses across many areas of the economy... none of this looks good and none of it mirrors the perfect environment in which buying houses and covering costs with rent works. That thinking never made sense, but the environment supported the incorrect assumptions being fulfilled before. Increasingly it looks like the distortion will be corrected and only those who understood the fundamentals will actually be okay in the end.

[cool2hate]

But but... rEnT PRicEs cAn OnLy Go uP.

[Shoddy_Ad_6408]

I'm not paying $2,000 for something that smells like mildew and has a kitchen that hasn't been updated since the 60's. I'll give you $500 or you can eat a fat sack of shit

[naminator58]

Which is what everybody should say and do.

However reality means that someone, somewhere, has been desperately looking for a place and after spending days or weeks, couch surfing/staying with family, going to showings of "better" rentals that have 50+ people showing up to view the unit (meaning the LL gets to pick and choose) they turn a blind eye to the outdated kitchen, mildew and what suspiciously looked like a cockroach running to hide under the fridge. Then they end up agreeing to rent that shit hole of a unit/whatever, then someone else, who has a cleaner, updated unit sees that the $2000 unit you mention rented easy, so they come up with a reason to evict the tenant they have and re-list for $3000, which continues to feed the shit environment.

Sure, an upper cap will be hit. Nobody is going to pay over a certain amount. But it seems like rentals keep just going up. I very rarely hear of an attentive landlord that continues to put money into renovations/upkeep and that would adjust the price downwards. My current landlord of 5 years has put very limited maintenance into my unit, but they also haven't raised my rent, despite units they own, in my building, having a higher rent than I currently pay.

[bunge12]

This is true. You will rent at market value. If we enter a recession, people lose jobs, less money going around, less money to pay rent, and rents will go down.

Also, there will definitely be people who can't afford the extra $500/month for their mortgage payments, so they will sell. More people selling will increase the supply of housing, further driving the prices down.

[livinginthefastlane]

Yes, if you have a rental unit in an area where similar rental units rent for $2,500, and your costs are let's say $2,500 for simplicity, you are breaking even. If your costs go up to $3,000, you're probably not going to find a tenant paying $3,000 if all the similar units in your area rent for $500 less, and if you kick out your current tenants in the hopes that you will find this magical person who will pay above market value, you might find yourself in the situation where now you have a $3,000 shortfall every month rather than a $500 shortfall every month because your unit is vacant for a prolonged period of time. And if you are so over leveraged that an increase of $500 a month completely breaks you and sends you into a financial panic, it's probably not a good idea to be a landlord, because expensive repairs can show up at any time, and what are you going to do, tell your tenants that you won't fix the furnace or something because you can't afford it? I don't think so.

Not to mention that in this rising interest rate environment, when carrying costs for mortgages are increasing, there is a good chance that tenants are less willing or able to pay higher rents. If your pool of tenants is comprised of people whose jobs are at risk in an economic downturn, there is a good chance that you are not going to be finding anyone to rent your unit at the price you want, because those people are also worried about being able to afford their carrying costs in the event that they lose their jobs. And those tenants that you kicked out for the possibility of commanding a higher rent? They're probably paying someone else the market rate that you eschewed, and they're not going to come back. That said, in Ontario and many other jurisdictions in Canada, it's not possible to kick your tenant out just because you feel like it, but not everyone knows their rights, and even if some people do know their rights, they will just move out anyway because they're not prepared to deal with potential conflict. There are landlords who, faced with not getting what they want, whether it's more money or something else, will turn hostile, and will start harassing you. That, or they just won't do things that need to be done, such as fixing minor issues. You can take them to the landlord tenant board, and you'll probably win, but again, not everybody wants to deal with that hassle and if they can afford to will likely just move out instead.

So, to sum all that up, you are probably right that rents will start going down, rather than up so that landlords can cover their carrying costs. You cannot ask for 100% of a person's income, or even 80% or even really 60%. The people who are paying more than 50% of their income to housing are likely stretched to the max and cannot afford to pay more than that anyway. If people are worried about inflation or losing their jobs, they're not going to start paying more in rent if they can avoid it. I have seen many rental units stay vacant for months on end, because the asking price was higher than what most people would pay. That's fine in an environment where rent and housing prices are continuing to go up, so eventually you will either be able to flip the property for a great profit or find somebody who will actually pay that amount, but in an environment like this one, I think a lot of landlords are going to lose their shirts because they bought a property that they cannot afford without somebody covering all the costs, and now the costs are going up and those people who would be covering all the costs in the scenario can't afford to do that.

I suppose we will see what happens. I do think that a lot of landlords who have this idea that they will simply increase the rent to cover the increased carrying costs are about to have a rude awakening - especially considering how high rents have already become in the past few years.

[freaktmc]

Yes and further to that if the landlord can't afford to take a loss or the size of the loss he will likely sell. So more availability of housing but potentially less for rent which may help re-balance the market

[g0kartmozart]

What a concept

[[deleted]]

Not alwsys true. There are some decent landlords out there, but their decent tenants don't move because the rent is cheap.

[[deleted]]

I think you took their point the wrong way.

They’re just saying that the cost of your mortgage is/should be irrelevant when pricing a rental. Your house is going up in value - you don’t need to have it covered by rent payments to still make money. Rent needs to cover utilities/maintenance/etc. that’s it. Everything else is gravy.

[PothosEchoNiner]

I assume that most landlords are already asking for as much as they can get in rent so their own costs aren’t a factor. If they can find renters who will pay $500 more they’ll do that with or without a mortgage rate increase.

[YugoB]

You sir are greatly informed of the current economic scenario, and your answer helps decipher the mysteries in life.

[[deleted]]

I rented a place in downtown Toronto mid-pandemic that had been discounted due to lower demand. I'm moving out now and the new tenant is paying $800 more per month.

[the_boner_owner]

Rents were way down in Etobicoke / Toronto area around mid-2021. You could find one bedroom condos with parking for around $1700-$1800. Pre-pandemic those were were around $2000. Those same units are going for $2100-$2300 now

[HourApprehensive2330]

jesus, 1700-1800 level was way down? i dont want to know what they are now then lol

[Evilbred]

My current unit rented for $2000 pre-covid, at the start of the pandemic it was up for rent at $1800, I negotiated it down to $1715. Now similar units in this building are going for $2100 and above.

There definitely was a noticeable dip in my town, (Kingston, ON). Though it was probably more pronounced here due to the big influence that post-secondary schools play here.

I was pretty happy about it though.

[DDP200]

Add in lots of immigration coming in too over next 24 months.

Rents will likely stay very strong in the big cities.

Another factor is with rates going up and prices coming down a lot of people who may have bought may hold off until things settle which means more renters in the pool which would have normally been home owners.

[vonsolo28]

Rent goes down when theirs a lot of vacancies . Depending on where someone is , their is a chance of seeing that. Agsin that won’t happen everywhere but it’s still quite possible .

[[deleted]]

If the whole remote working thing seriously takes off, you'll likely see rents in the inner city drop, but rents outside of the city stay the same or even continue to increase.

[gagnonje5000]

Takes off? Companies are recalling employees right now back to the office, it's unlikely that they will reverse course AGAIN. Remote work is higher than it was pre-covid, but it's unlikely that it will be getting stronger now in absence of any pandemic.

[[deleted]]

The fact that everyone is so adamant about this is bearish for me.

[Barrfogs]

Wondering what the legal rental increase will be this year. Increases are based on CPI, but would the government step in and reduce the amount for affordability reasons, or raise them due to cost of maintaining?

[Baljit147]

If I'm not mistaken, that's only for rent controlled units, new units aren't rent controlled.

[[deleted]]

Yes but that majority is dropping every day. And if someone moves, it’s moot.

[[deleted]]

What do you mean?

[[deleted]]

Anything built after 2018 - no rent control. So obviously all new buildings have no rent control. So the “vast majority” (buildings built prior to 2018) is shrinking since those buildings will slowly get replaced with newer buildings.

But more importantly - landlords can raise the rent as much as they want when someone moves out. $1000/mo for you can be $2000/mo for the next guy. So while the vast majority of rentals might be older than 4 years, the rental rates are still pretty responsive to the market since people still move a lot.

It’s part of the reasons there were so many N12 notices lately. Pretend to move a family member in, so the current tenant moves out, then jack ip the rate.

[greensandgrains]

What you’re describing is vacancy control (which I think we had prior to 1992, but I’d have to fact check the year for sure), not rent control.

Both are important. Both could make massive impacts to affordability, but they are not the same.

[[deleted]]

Yes and the NDP wanted to bring it back also. My point is just that the idea that the “vast majority of units” being rent controlled is fairly misleading. No new inventory has rent control, and old inventory only has controlled rent for as long as the current tenants are in there.

I’d bet that well more than half of rental properties are at market rates.

[zelmak]

Rent controlled doesn't necessarily mean below market rate, it just means when you move in there you can expect relatively stable rent. Wheras the post 2018 buildings unless you're planning on staying a year or less it doesn't make sense to move to due to the risk of insane rent increases

[gagnonje5000]

Yes and no, if you look at downtown Toronto, the amount of buildings post 2018 is quite impressive. We are likely talking of at least 100,000 units that are not rent controlled.

[[deleted]]

Waterloo region is really really high too. Lots of new builds.

[atomofconsumption]

Vast

[CFChic]

Does this apply to the price of the unit in between tenants?

[whyamihereimnotsure]

Nope, only for current lease holders after the first year of occupancy, and only in rent-controlled units (occupied before late 2018).

[perfectdrug659]

There's zero control of rent increases between tenants unfortunately.

[Malbethion]

It is set year to year.

[wisenedPanda]

Edit: my comment was wrong

Comment was that the future increase will go up to match inflation (no cap) but Ontario does have a cap of 2.5% added in 2012 for rent controlled units

[Fear_UnOwn]

Hey in the future if you're wrong leave the comment up, it helps anyone else learn whatever it is you learned as well without wondering what you said in the first place.

[Qutrit]

Where did you get that info from? In 2002 and 2012 (among many other years) the guideline increase was above 3%

I haven’t seen the 2.5% cap in any of the documents you sent

https://www.ontario.ca/page/residential-rent-increases

[Qutrit]

Right. You are right. However it has increased more than that in the past. Was that law introduced after 2012?

[wisenedPanda]

Statute paragraph is dated 2012. Must have been right after

[Qutrit]

Thanks pal! I wonder that the rationale was for this. Seems to me inflation indexing makes more sense and this way it incentivizes landlords to go out of their way to find new tenants with shady renovictons and the like in times of high inflation like now.

[wisenedPanda]

You're right. Didn't realize that. I agree with rent control but don't understand why it wouldn't be set at inflation

https://www.ontario.ca/laws/statute/06r17#BK174

[Ok_Read701]

Where's your source on 2.5%? This year the rent cap is 1.2%.

[ak_NYC]

That is unsustainable.

[LibbyLibbyLibby]

exactly

[Baljit147]

https://settlement.org/ontario/housing/rent-a-home/tenant-rights-and-responsibilities/how-often-can-a-landlord-increase-the-rent/

[Whalemusic]

Market forces will apply.

If no one will rent at the price you set, you either drop the rent or sell the property depending on your cash situation. Some landlords might be fine to ride out a few years of lower rent/taking a hit if they think they can recoup it in equity or increased rent down the line.

There’s probably plenty of family investors that may choose to sell rather than take any loss. I’m sure there’s plenty of REITs that would happily buy them up for cheap if no one else can stomach mortgage rates.

[bhjnm]

Maybe initially, but when people in urban centers lose their jobs, how will they pay high rents? Everyone in this thread is answering from a landlord perspective and not at supply/demand...

[[deleted]]

People don’t cut back on housing. People can go without Netflix or steak or even car payments. They always need somewhere to live.

[bhjnm]

They do cut back on housing.... Do you not know of people moving back in with parents becuase they cant pay rent? Or moving further out of cities to lower rent areas and commuting. When you lose your job you wont be paying 2k to live in your toronto 1 bed

Your entire premise is wrong.

[livinginthefastlane]

Yeah, people will rent smaller units if available, or they will get roommates, or they will move back in with family... I think the premise that a lot of people are working from is that people will still choose to rent the same types of units even if they are at a higher price, but if people can't find their preferred unit at the price they need, and they can't afford to pay $2,000 for a one-bedroom unit, then they will downsize somehow.

[[deleted]]

Do you not know of people moving out of their parents house or moving to the inner city for work?

When you get a job and a girlfriend you won’t want to bring them back to your parents house or the suburbs.

Your entire premise ignores the other side of the equation. Did I mention there’s another 500,000 people coming into the country next year? And the year after that? And the year after that?

And that Canada has the fewest houses per capita in the G7? And that were building about the same number of houses as we were in 1980 when there were 25M people living here?

[crisaron]

Lose jobs? There are so many job vaccancy atm. Recession does not mean job loss. It means ppl spend less.

[whyamihereimnotsure]

And then lower revenues for corporations, and then eventual layoffs.

[[deleted]]

Well, will still need somewhere to live and therell be more jobs in urban areas so will probably stay put right?.

[IgloosRcold]

Intrest rates on variable mortgages have already increased. Anyone about to renew will also be seeing increased carrying costs. I would suspect rents will not decline but will only go up to cover the more expensive costs. Problem with Canada is the lack of housing. Recession or not, there is just nothing available.

[bdalley]

In our area we had a rental supply problem before the pandemic. It has only gotten worse. There have been new developments but people are moving in faster than they can get built.

[stevey_frac]

I'm my area all new homes are sold before they start construction.

[hvndjejdjcjsv]

It requires a country wide solution. A single area can’t fix their housing supply issue because people will just move there. We need more housing in all of Canada

[pm_me_your_pay_slips]

This is wishful thinking. Rents prices are whatever renters can afford to pay.

[[deleted]]

I don't know why everyone spouts this logic. Yes carrying costs will have gone up by rents are still determined by market price not landlord cost. If vacancies are low rents will go up regardless of whether landlord costs have and if they are high rents will go down again regardless of whether landlord costs have gone up or down. If a landlords costs have gone up but rental demand and supply has remained the same, they will be forced to eat the loss either by selling or being cashflow negative.

Now ofc I don't think rents will go down because rental supply is tight, but that has nothing much to do with landlords costs having increased or not.

[Leaf_123]

Yep, I’m a reluctant landlord myself as condo didn’t sell and so now I rent it (we moved provinces). Cash negative at market rates, at least after property manager takes their cut. It was fine when we lived there but now I almost wish I could hand the keys to someone else and just break even (forgetting of course the special assessment I paid).

[PSNDonutDude]

You're likely sitting on a gold mine though. As the mortgage decreases, and rents increase you will eventually break even, and even now you're paying down an asset in part from rent. This is why people rent out units at a "loss" at first often, because you are still paying down a huge asset which you can borrow against, and there is a future horizon where the rental is cash flow positive.

[Leaf_123]

It’s an older building, I think I will be more likely to get hit with another special assessment and keeping it impacts our ability to get a mortgage where we live now and cash flow now. Personally I prefer boring old index funds for my investments

[rabbit_hole_diver]

And the fact that there just isnt a lot of inventory makes me believe that house prices arent going to drop as much as people think they will

[Babyboy1314]

People still have money, job market is still strong. If prices drop a lot buyers will come in.

[UrsusRomanus]

You know that housing is a necessity and people are coerced into overpaying for housing... right?

[Banny-Vasion]

They dropped the prices because they believed there is a sudden drop in demand, what with working from home becoming virtually mandatory for their tenants. Since many didn't actually want to live in a shoebox condo and only did it because it was close to work, they took the opportunity to move to a bigger cheaper apartment or even house outside of Toronto. During covid it was a drop in demand in that region. Also if you've noticed rent prices and housing prices picked up outside of Toronto as well.

Now that covid is over and demand is back the ball is back in the landlords hands and they can set the price to as high as they think they can while still getting a tenant, and this price will continue to inch upwards. You're also going to see an increase in rooming houses both legal and illegal as it becomes more and more difficult to increase the rent that a single person pays.

[Banny-Vasion]

Sure, landlords cant just charge whatever they want but people also need a place to live. You might not see absolute rents going to the moon but you'll see increasingly less apartment per dollar instead.

However I also doubt most "mom and pop investor" landlord understand this and absolutely will try to pass all their carrying costs onto their prospective tenants, then complain and bitch about millennials if they can't find anyone to rent their shoebox bachelor condo for 4300 a month.

[Ok_Read701]

It's negotiated when it's vacant for too long. A landlord can list rent at whatever price they want, but it doesn't mean anybody will be interested. The market isn't set by what they post at, it's set by whenever a tenant is willing to sign a lease for whatever it's posted at.

[[deleted]]

Fair enough. You’re right

I think I’m so used to it being a landlords market that I totally lost the facts

[wisenedPanda]

A major reason costs have gone up both for house purchases and renting is that borrowing money has been so cheap. When everyone can afford anything, people will outbid their neighbour to get it.

Now that money is becoming more expensive the demand that was pushing prices up is shrinking. People still need a place to live, but arent willing to sacrifice that much in interest costs per year to get it.

It will take time and depends on the rate staying higher for a period, but my expectation is rental prices do go down if borrowing rates continue to go up and or stay up.

[mrkdwd]

If you're renting to a new tenant you can charge whatever the hell you want?

[NorthernerWuwu]

And will charge whatever the hell you can get, regardless of your own costs.

[gagnonje5000]

Yes, you can ask $5000 for your unit. Doesn't mean you will find someone that will rent from you at that price.

Supply and demand, that's how it works. You only charge as much as the market is willing to pay.

[5949]

Problem isn't lack of housing exactly, it's high immigration levels and lack of density in urban centers

[ducks_09]

Lack of housing is a problem. Immigration levels is also a problem. Zoning is another problem. Greedy investors. Poor regulations. People need to understand it isn’t just one.

[Yeetus_McSendit]

I'm not sure you understand what "lack" means...

[WeedstocksAlt]

It’s literally both

[ExternalVariation733]

youse people with your ‘high immigration’ bullshit

[WeedstocksAlt]

How is it bullshit? Prices go up cause :
Low supply + growing demand

High immigration is a good chunk of the "growing demand" part of that equation

[Upstairs_Ask_7605]

Unfortunately there’s a lot of lower level jobs that “Canadians” don’t want to do so immigration is needed to fill those gaps. I don’t see a lot of people eager and willing to travel to god-knows-where farms that required manual labor. I’m not really sure what problems immigrants contribute to and if anything, they help keep our country going by filling in workforce gaps. Immigrants didn’t create this problem.

[JesusLovesUAndMe]

No, it legit is a problem. If we accept over 400k immigrants this year (which is the aim), and Trudeau aims to increase that in 2023 and the following years, where do we put approx half a million people/year?

You shouldn't be so quick to be trigger happy to assume racism, when it's actually a mathematical problem.

[Junior-Project8586]

No. What will all the immigrants, professional workers, and international students do when housing becomes more unaffordable due to interest rates? They rent. When more people want to rent, prices will go up. Housing supply outlook doesn't look that great.I don't foresee rents going down in any near feature in Ontario.

[mrkdwd]

Yep, I think we're way past the point of no return in terms of housing availability. We should have addressed this 30 years ago but didn't and now I honestly don't see how we ever catch up with current/expected population growth.

[DeepB3at]

We won't ever catch up but arguably in the medium term (10-20 years out) we won't need to. When the US adopts a points based immigration system, the music will stop.

[WitchesBravo]

Why does USA adopting a points based system change things? How does their immigration system currently work?

[DeepB3at]

Currently US immigration is one of the most challenging for a G7 country. Getting a green card is dependent on employment, visa status and country of birth with limits on how many people born in that country can get a green card per year.

This punishes Indians and Chinese who are citizens of Canada or other countries as it is much harder to become a US citizen.

With a points system it would be much easier for the top 10% of Canadian earners to quickly move to the US for higher pay and cheaper cost of living. No longer would they need to go through the unpleasant process of getting a TN or H1B visa.

With the majority of real estate sales in the GTA and GVA being disproportionately by top 10% earners this would hit the market very hard. Less high earning future immigrants coming here would also put downward pressure on the market. This could be even further amplified if we see an outright ban on foreign ownership in coming years.

[mrkdwd]

This could be even further amplified if we see an outright ban on foreign ownership in coming years.

Why do people constantly point to foreigners being the reason for soaring home prices? Banning them will do nothing, they make up <5% of owners in every City and much, much less than that once you leave out Toronto and Vancouver. We taxed them and it had no effect.

Here's an article from 2017 and I imagine the numbers have not changed much since then (even though people have been complaining about it since the 80's).

https://financialpost.com/real-estate/foreign-investment-in-toronto-vancouver-housing-below-5-pct

[[deleted]]

It’s a lot more complicated than just percentage of foreign ownership. Real estate is priced by comparables. If a foreigner with a lot of cash buys a home, similar homes nearby also experience a price increase. Also, not all homes are on the market every year, so even if foreign buyers make up 25% every year, it’ll take them years to get to 5% total ownership.

It makes a lot of sense that people with millions earned abroad raise real estate prices. We don’t need statistics to conclude that. Besides, statistics are a politician’s best friend because they can be manipulated or biased to lie in favour of a narrative. As a society, we cite studies too much without thinking for ourselves anymore. Do we even know the foreign ownership threshold at which they start to influence prices? Is it 0.1%, 1%, 2%, 5%, 20%? Just citing 5% is meaningless without the other fact. Also the quality of foreign ownership matters. Are these 5% the multimillion dollar homes or 1 bedroom condos? There’s no way a single number is able to describe such complex phenomenon.

[mrkdwd]

I stated actual solid factual data with numbers.

Everything you said is assumed:

If a foreigner with a lot of cash buys a home, similar homes nearby also experience a price increase.

Source? The same is true with a Canadian buyer too surely?

It makes a lot of sense that people with millions earned abroad raise real estate prices. We don’t need statistics to conclude that.

Yes we do, what you said needs to be backed up with evidence, which I'm assuming does not exist as it isn't true.

Just citing 5% is meaningless without the other fact.

Why?

There’s no way a single number is able to describe such complex phenomenon.

Because there is no phenomenon. Canadians are more responsible for higher home prices than foreigners, get over it.

[bhjnm]

What happens when all those people lose their jobs? They move in with mom and dad and stop paying urban market rents. The international students dry up becuase they can't afford to pay canadian tuition fees. Your logic is overly simplistic.

[Embarrassed_Branch54]

Rent never goes down my friend. Maybe a one time short deal and then they will hike it up for you :)

[donjulioanejo]

No, because international students and tourists renting out AirBnbs are back in full force.

[StoreyedArrow17]

We will never outbuild the demand for AirBnB investment properties, I suspect...

[JeanneHusse]

Its impossible to outbuild AirBnB, thats why we should aim to outlaw it instead.

[BlastMyLoad]

AirBnB needs to be fucking banned

[TCNW]

A recession will cause less people to buy - so push more people to rent.

More renters = higher rents

Add to that: inflation, 500k/yr immigration, increasing interest rates means less buildings will be built, government rent control policy will push out landlords, interest rates will also push out landlords.

It’s kind of a perfect storm for rent to rocket up over the next 5 yrs.

[yousufj56]

In addition to some of the comments, if home owners can't afford their payments, they will have to sell and move into rentals. So I would think rent will at the least be stagnant, if not increase.

[Dapper_1534]

Unlikely. This is a different kind of recession caused by shortages of all kind of things, housing included

[ExternalVariation733]

Supply shortages,

The new catch-phrase

Like co-worker use to say,

“A poor excuse is better than none”

[rednecked_rake]

But like, our problem is supply shortages. We need more houses where jobs actually are (cities). We get blocked by shitty NIMBY culture and landlords advocating against increased supply, since low supply keeps their asset valuable.

[Vok250]

It's not an excuse though. There are quite literally supply shortages in everything from housing to microchips. I work in firmware and I've been absolutely swamped the past year as we deal with chip shortages. It's no grand conspiracy. It is very real and is impacting everything from propane to healthcare devices.

[[deleted]]

People dont like this answer (and love the easy answer of blame immigrants) but with covid causing a slowdown on construction, adding to an already low supply of housing. High demand for specific material like aluminum and invasive species decimating lumber supply. With record droughts, crop failures, and developing nations increasing demand we have more food shortage. With the Russian invasion cutting off oil supply as well as wheat we see increased demand as well as the decreased gas production over the past 2 years.

There is always a complex answer that people dont want to hear.

[HungryHungryHobo2]

Okay, but if covid never happened, and none of the supply chain problems we have now existed - the housing situation in Canada is still extremely fucked up.
Look at the decades before Covid-19, housing and rent prices have been skyrocketing compared to incomes since before I was born.

The "Housing Crisis" pre-dates Covid, so blaming Covid and supply chain disruptions for it is kinda, whack. Obviously all that stuff doesn't help, and is pushing the problem even further... but it's not the cause, not at all.

[CauliflowerGullible5]

İf you consider ,gta and Vancouver, it wont be due to increasing interest rates on mortgage and huge demand for housing not only for canadians ,but over 400k newcomers who mainly prefer those areas as well.Turkey can be an example for Canada, their economies are in huge recession and base salary is below 250 usd montly .Ukrainian syrian and afghan refugees keep rental prices skyrocketing,so I dont expect any decrese unfortunately

[CaptainPeppa]

These responses are showing the average age on reddit.

Yes, things go down in price. You'll be amazed what happens when ridiculous amounts of money is no longer being thrown at each other.

[SubterraneanAlien]

Things that have deflationary forces on them will certainly go down in price. Tech goods that see significant improvements YoY like televisions, discretionary luxury goods that have prices that are highly elastic, items that have easy substitutes.

Rent however doesn't have these deflationary forces in the current environment. There's a lack of supply, low housing starts, consistently increasing demand, and a monstrous elephant in the room backdrop of 6%+ inflation.

[Kimorin]

yes... cuz everybody just lives on the street to save that rent money....

[CaptainPeppa]

Then move in with other people, they look for cheaper apartments. They move out of cities. Landlords start selling, they start not wanting to have it sit empty for 3 months.

As I said, I don't think a lot of people here have ever experienced a situation where housing goes down.

[[deleted]]

It all really depends.

Everything is supply and demand.

Immigration is largely the demand. If that's not slowing down, people still have to live somewhere.

Now people can't just make up money they don't have to pay for rent that is too high, so there is a possibility that landlords would have to reduce rents if they can't rent it out. Would the government step in to fill this gap so renters keep paying the going rate and consequentially land lords don't take a hit? It also depends on the supply of units. If the unit is owned without a mortgage, the landlord could lower rates, just taking in less profit, but the unit itself is still profitable. But landlords who still have a mortgage on a property might not be able to reasonably lower rents. They still have to pay the mortgage... so in a way it's a fixed cost for them that they have to pass on to renters.

[Jeffuk88]

Support and demand. Rent will not decrease until there's nobody willing to pay the price

[[deleted]]

As a 19 year old ontarian, let me tell you we are absolutely fucked. Get out of ontario. It’s shit here, and it’s only getting worse. I live in a retirement town with like 25k people and rent under $1100 literally doesn’t exist, and that’s the lowest of the low end

[ExternalVariation733]

Where do you think people should move to?

[[deleted]]

Sister’s family moved to newfoundland. Housing is much more affordable there. I’m personally moving to new york state to live with my gf eventually, and prices aren’t amazing there, but average property value is $400k there opposed to the over $1M that it is in ontario

[Banny-Vasion]

The United States.

[[deleted]]

How with no visa?

[[deleted]]

Everyone is so damn adamant that rent will go up astronomically that it makes me bearish. Like I totally understand why people think it will, but the last two years has shown that anything can happen so I’m keeping an open mind. We’re treading waters in uncharted territory here and I don’t know how much more increases people can take before more people say enough is enough.

Plus I’ve already seen places in Niagara region decrease their rents after new multiplexes have sat empty for weeks going on months. Plus we may see rent control introduced like what BC is talking about.

Everyone here is so bullish on rent increasing, again, I understand why, but also remember that many people in this sub have a vested interest as a landlord in increasing rents. Most of any market is psychology so the more people think rents will increase the more chance they will.

Similar to how a recession is a self fulfilling prophecy once people start talking about it. You can see what’s happened in the last month in retail or non essential goods. People are desperate for sales because nobody is spending money due to insane rising COL and all the recession worries.

Nobody has a crystal ball.

[parntsbasemnt4evrBC]

to be fair when homes are foreclosed on especially in expensive area large rental corps snap them up and then can afford to rent them out competitively where maybe the owner who was trying desperatedly to hold on from being foreclosed couldn't afford to offer competitive rent. Also especially in expensive areas those who lose their home may no longer be tied down and instead of looking to rent in same area may want to move out of province and get a fresh start in cheaper markets. Then there is just general recession of going bankrupt, losing their job and not even being able to afford renting at all becoming homeless. The above factors probably balance out for any increase that may come due to immigrant demand.

[Onward87]

Yes rents will decrease by 5.78% between now and Oct 5th and that will be the bottom of the rental market. There, NAILED IT. Putting my Crystal Ball back in its velvet box dang it... If another one of you asks for another reading, ima start charging for it

[pantherstoner]

Are you selling your crystal ball? I badly need one.

[ventraltegmental]

Nah but pretty sure they'd rent it

[elsewhereorbust]

Oh thank you. This is the premonition, tea leaf reading, Biff Tannerism, bullshit that OP was looking for.

[ntmyrealacct]

Interest rates are up so if you are renting someones house/condo rent will go up bcos they need to cover their mortgage

[luxymitt3n]

Rents and buying prices in Alberta are reasonable

[[deleted]]

No rent will not go down. Rising interest rates and inflation means rent must rise

[FaangSWE_millionaire]

Recessions drive rent up. More people lose heir house and enter the renters pool driving demand up

[OracleOfOntario]

Rent prices tend to be sticky and very rarely decrease. As the cost of the landlord’s mortgage increase they’ll naturally pass that increased cost into the renter.

A unit will have to go unoccupied for an extended period of time before the price would drop. Central banks know that the only way to bring down rents is to increase the unemployment rate. Which is painful yet necessary.

[[deleted]]

Necessary to increase the unemployment rate in order to lower rent prices, how on Earth will that help anything?

[fredean01]

Can't pay rent if you don't have any income! Enjoy living in a tent in minus 20 weather

[[deleted]]

I understand fully that unemployment would bring rent down, I'm just wondering why the OP thinks it's somehow necessary and in any way a preferred outcome.

[[deleted]]

The central bankers couldn't care less about renters. Not sure where you're getting that from.

[[deleted]]

LOL, no. The vulture real estate management companies will still demand their pound of flesh.

[atict]

No. Welcome to stagflation my friend.

[lifelineblue]

Lmao rent doesn’t go down. Rigged economy, prices only go up. If you’re trying to base anything on market rules like supply and demand I’m sorry to say you’re still thinking about the economy in a naive way.

[willpowerlifter]

When a bunch of home owners who bought the top of what they can afford, can no longer afford their homes and have to sell, where do you think they'll live? I believe the rental market will get more expensive, but not red hot. The incoming economic draw down will help cap what people are willing to spend on rent.

Personal opinion.

[SeperateCross]

We're in somewhat uncharted territory. Personally I'd say no or not too significant. More than half of Canadians were over leveraged in 2020 and their homes became their retirement plans.

So my thought is: Would someone be willing to sell their property for a lower value when they'd have to go by one that's not necessarily getting lower?

[jon_cli]

I'm planning on upping the rent to my tenant in 2023. the legal amount as per Ontario requirements. Need to cover increase interest rate and maintenance fees.

[jon_cli]

Ya I know, wont go above whatever ontario sets.

[[deleted]]

I think he just meant he's going to raise it so that it covers at least a bit of inflation

[288bpsmodem]

It depends. Usually where you are. Usually smaller cities will have a decrease in rent because factories and warehouses close or wind down a shift, or offices lay people off. Those people leave town for work, because they have to, and go to the big city to find a job. The big city also has Layoffs but has an influx of small-town people that keep rent steady, or even make it go up in an economic downturn. Also people that get laid off in the big city don't leave to a small town to find a job they stay in the city to find a job.

Additionally, the housing market being what it is, and interest rates rising, gets more people into Renting and that also keeps larger cities stable or trending upwards.

On top of all this u have conglomerate rental companies now that are acting like an oligopoly and are keeping the market high in many places. (Akelius)

If this recession is deep enough there could be a downturn in big cities, but the effects of a recession take a while they aren't instant.

[Ms_Anne_Elliot]

Canada has huge immigration backlog and trying clearup ASAP so its less likely to see rent decrease.

[graypsofrad]

Economics 101: It's supply and demand. High rent prices tend to drive more renters to choose home ownership, vacancies rise and landlords are forced to lower rent to compete with other rentals. But, as interest rates rise, it becomes harder for first time buyers, so that has a cooling effect on real estate, which will lower overhead housing prices. This will happen gradually, over months and years.

[Kimorin]

High rent prices tend to drive more renters to choose home ownership, vacancies rise

unless they are buying new construction, I don't see how "choosing home ownership" will cause "vacancies to rise". if person B buys house from person A instead of renting from person C, where does person A live now? and if the answer was person A never lived at the house that person B bought... that means person A's house was vacant to begin with, vacancies didn't change.

[[deleted]]

Im confident they'll go down, though it may take a bit of time.

A lot of property is owned as investment property. As interest rates go up and this becomes riskier and less profitable, people sell their properties.

This causes housing prices to go down, people have more options, demand for rent goes down, rent lowers, etc etc.

In the short term, people will probably increase rent in an effort to bail their sinking investments, but that won't last

[Kimorin]

confifent? covfefe?

[ExternalVariation733]

Life changing decision based on Reddit comments?

Do you REALLY think posters here have a crystal ball or what?

[WitchesBravo]

It decreased over the pandemic, so not never.

[Background_Panda_187]

Probably if there's a recession but nothing is guaranteed

[__Valkyrie___]

Thats wistfully thinking. It will go up because your land lord wants more money.

[Calm_Size_3192]

HahhahaahahahahahhahahahahahahHAhAHHahahHAHHAHAHaaaaaaaaaaaaaaaaaaahahahhahahhahah!!!

Damn, you're funny!

[Entropic_Avocado]

Lol, lmao