According to a recent Royal LePage survey, conducted by Hill & Knowlton,1 27% of Canadians who currently rent their home say they plan to purchase a property in the next two years. Among those aged 18 to 34, that figure jumps to 40%. Meanwhile, 69% of renters say they do not plan to buy a home in the near future. Among them, more than half (54%) do not feel their income will be sufficient to afford a property in the area where they wish to live (61% among respondents aged 18 to 34).
“The rental sector is not immune to the significant affordability challenges stemming from Canada’s acute housing shortage. High mortgage rates have made it difficult for many to purchase a home, forcing some to move into, or remain longer than planned, in the rental market,” said Phil Soper, president and chief executive officer, Royal LePage. “Despite a short-lived decline in prices and demand for rental units during the height of the COVID-19 pandemic, the available supply of rental properties in most major markets remains ultra low.”
Nearly a third of renters contemplated home purchase before signing their lease
Before signing or renewing their current lease, 29% of Canadian renters say they considered purchasing a property. Among them, 41% say the lack of a sufficient down payment led to their decision to rent instead.
When asked about the motivating factors behind their decision to continue renting rather than buy, approximately one third of respondents said they were waiting for interest rates (33%) and property prices (30%) to decrease. Twenty-two per cent said they are continuing to rent while saving for a down payment, and 20% said they did not qualify for a mortgage. Respondents were able to select more than one answer.
“While a third of Canadian adults are currently renting, and there are families who are perfectly content doing so, the desire for home ownership remains strong among a large portion of this segment of the population. Our latest research reveals that a material number of renters wish to transition to home ownership. Understandably, the greatest barrier to entry is the ability to drum up the initial capital for a down payment,” continued Soper.
For some Canadians, rental prices eat up 50% of take home pay
Nearly four in ten Canadian renters (36%) spend up to 30% of their net income on monthly rental costs. Meanwhile, roughly the same amount of renters (37%) spend between 31 and 50% of their income on rent, and 16% spend more than 50%. In Canada’s most expensive housing markets, Vancouver and Toronto, the proportion of renters who spend more than half of their income on rental costs increases to 27% and 19%, respectively. That figure dips to 10% in Montreal.
According to the latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC), the average rent nationally for a two-bedroom unit in October 2023 was 8.0% higher than a year prior.2 Vacancy rates sat at 1.5% and 0.9%, respectively, for purpose-built rental buildings and condominium apartments.
“From coast to coast, Canadians are struggling with housing affordability in the wake of one of the most aggressive interest rate hike campaigns in history. Across many regions, rental demand vastly exceeds supply, making affordable housing a challenge. The housing industry and government must collaborate on innovative solutions to increase inventory, including rentals, and support those most impacted by these escalating market conditions,” concluded Soper.
Here are a few highlights from the Royal LePage 2024 Canadian Renters Report:
- Of renters who say they plan to buy within the next two years, half (50%) say they will have a down payment of less than 20%
- When asked how they will come up with their down payment, 53% of respondents said they will use savings accumulated over the years
- 44% of renters planning to purchase in the next two years believe they will be able to afford a home in their current city of residence, while 37% do not
- In British Columbia, 25% of renters spend more than half of their net income on monthly rental costs, well above the national average of 16%