Frigid Sunday Dock Read – Average Rents Hit Record Highs; Ottawa to remove GST on New Rental Housing

Record high in rents

A recent report from a Canadian rental listings website reveals that Canadian landlords are now demanding an all-time high of $2,117 per month on average. This data, compiled by in collaboration with the real estate research firm Urbanation, points to a continuous upward trend in the rental market. In August, there was a monthly uptick of 1.8%, contributing to an annual surge of 9.6%.

This remarkable increase in rental costs occurs against the backdrop of high interest rates and rising expenses for property owners, leading to an overall increase in the cost of living. The rental market’s relentless ascent remains unabated, according to those responsible for the report.

In July, the average asking rent climbed by 1.8%, pushing it to an average of $2,078 for the month. It’s important to note that this metric is based on what new tenants are asked to pay and does not reflect the current monthly payments of existing tenants, underscoring the persistent challenges faced by renters across Canada.

The recent report indicates that although the annual inflation rate for asking rents in August was lower than the 12.0% increase recorded in August 2022, it still reached a four-month high last month.

From May to August, asking rents experienced a 5.1% increase, resulting in an average increase of $103 per month. To put this in perspective, this rental amount is equivalent to the monthly mortgage payment for a $350,000 home with a 5% down payment. Given most homes are bought by couple; this puts us in the $700,000 range.

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Ottawa to remove GST on new rental housing

The federal government, led by Prime Minister Justin Trudeau, has announced the removal of the GST (Goods and Services Tax) on the construction of new rental apartment buildings. This decision comes in response to concerns about rising rental costs and the challenges faced by builders due to high interest rates from the Bank of Canada. Trudeau is encouraging provinces and territories to follow suit in eliminating the GST on rental construction to address the growing need for rental housing.

The Canadian Home Builders’ Association has welcomed this move, stating that it addresses a long-standing issue that has hindered the construction of rental housing. They believe it is a necessary step to ensure the continued development of rental housing in the years ahead.

As part of their efforts to tackle the housing crisis, the government has also introduced measures such as the Housing Accelerator Fund, with London being the first city to receive funding to build 2,000 units over the next three years. Additionally, the government is implementing a policy requiring cities to permit at least 15% more homebuilding each year to qualify for federal grants, with incentives for those exceeding this target and penalties for those falling short.

The Ontario Real Estate Association’s CEO, Tim Hudak, has praised this plan as a positive step forward.