Market update July 2024: Rents spike despite rate cuts

The Bank of Canada has become the first G7 central bank to cut the interest rate since the pandemic. What does that mean for the rental market – and could it revitalise housing sales?

• On June 5, the Bank of Canada cut interest rates to 4.75% from 5%. Renters waiting patiently for rates to drop may now see a chance to buy a home. If interest rates keep falling, more and more renters might become homeowners, which could spell trouble for landlords and property managers.

• “I believe a lot of people were waiting for the Bank of Canada to wave the green flag,” said James Mabey, Chair of the Canadian Real Estate Association (CREA). “That first rate cut is expected to bring some pent-up demand back into the [sales] market.”

• On the flip side, new homebuyers could opt to rent out the property instead of moving in themselves, increasing rental supply and growing the pool of potential clients for property managers.

• The effects of the cut may take a while, as CREA reports an average national home price of $699,117 in May – down 0.6% month over month and 4.1% year over year.

• Ontario continues to have among the highest home prices among the provinces (second only to British Columbia), averaging $890,634.

• CREA also reports a negligible 0.6% uptick in month-over-month home sales in May.

• The sales-to-new-listings ratio held steady at 53% in May, meaning the national housing market remains almost perfectly balanced.

• Meanwhile, the national average asking rent rose by $12 in May, reaching an all-time high of $2,202 and surpassing the $2,200 level for the first time, according to Rentals.ca.

• The average rent for one-bedrooms in Toronto rose 0.8% to $2,479 from last month, contributing to a 0.7% month-over-month increase in Ontario's overall rent average.

• The Canada Mortgage and Housing Corporation (CMHC) reports a 10% increase in nationwide housing starts, from 241,111 in April to 264,506 in May. Multifamily starts increased 47% in Toronto.

More rental market headlines

Most renters can't afford to buy a home due to insufficient income – Canadian Mortgage Professional

Some Canadian retirement homes are renting out to students at reduced rate – National Post

Why this landlord is living in his restaurant basement – CBC