One of the more notable trends to emerge at the end of 2022 and early this year has been the rise in rental prices across Canada. Its popularity increased last year in response to rising interest rates and sky-high home prices. Renting is seen as a more affordable option by a lot of potential buyers perturbed by the high cost of borrowing. But how much more affordable is it?
To find out, Zoocasa analyzed data for 21 different markets across Canada and compared monthly rental prices and monthly mortgage payments for the average home in each. Additional costs for each were not considered, such as utilities or property taxes. Rental price numbers were sourced from Rentals.ca, while the monthly mortgage payments were calculated by assuming a 20% down payment at a mortgage rate of 4.69% amortized over 30 years on the average-priced home.
Rentals are more affordable across most of Canada
Of the markets we analyzed, mortgage payments were less expensive in just two – Winnipeg and Quebec City. The average rent in Winnipeg is $1,435, while the monthly mortgage payments for the average home would amount to $1,360 a month. In Quebec City, the mortgage payments each month would total $1,300, just shy of the average monthly rent of $1,355. Halifax-Dartmouth is the next closest to having more affordable mortgage payments, with monthly mortgage payments costing just two dollars more at $1,995.
Compared to mortgage prices, the rental markets that have the biggest price difference between rent prices and mortgage payments are in the cities with the most expensive home prices – Vancouver, Toronto, Oakville-Milton, and Mississauga. Of these cities, rental prices are the most affordable in Mississauga at $2,395, the most significant difference in rent and mortgage payments is in Oakville-Milton, with a difference of $2,626 between the two. Rental properties are at their cheapest in Regina, with the average monthly rent just $1,150, but as this is also the most affordable market in terms of housing price, this is to be expected.
Will Rental Prices Decline?
Rental prices have been on a very slow decline over the last few months. According to rentals.ca, rent prices have fallen by 2% over the last three months, indicating some softening in the market. With the housing market kicking back into gear, the improvement in rental supply and the lack of affordability in the rental market, prices are adjusting slightly. The housing market could see increased activity as we move into the spring, and as the Bank of Canada has not budged on its current lending rate, sideline buyers might finally make their move.
As the Canadian population continues to outpace the rate at which new housing is being developed, it’s likely that housing affordability, whether renting or buying, will continue to be top of mind across the country. Determining whether renting or buying is the best option for you depends on your unique circumstances and goals. The first step in determining what makes the most sense for you is to speak to a qualified real estate agent in your area.
