More than a quarter of renters in Canada plan to purchase a home within the next two years

Among those who expect to continue renting, insufficient income noted as greatest hurdle to home ownership amid tight competition in supply-strapped market

Highlights:

• 27% of renters plan to buy a property in the next two years; 40% among renters aged 18-34
• Of those who do not plan to buy a home in the next two years, 54% say they do not feel their income will be sufficient to afford a property they desire; 61% among those aged 18-34
• 29% of Canadian renters say they considered buying a property before signing or renewing their lease; 41% of them lacked a sufficient down payment
• 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%

TORONTO, June 20, 2024 /CNW/ - One third of Canadians live in rental accommodations, and that figure has been gradually increasing in recent years, as affordability challenges in the resale market persist. According to a recent Royal LePage survey, conducted by Hill & Knowlton,1 27 per cent 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 per cent. Meanwhile, 69 per cent 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."

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 per cent. Twenty-six per cent say they will put 20 per cent down, while 15 per cent say they will have a down payment of more than 20 per cent. In Canada, mortgage insurance is required for homes purchased with less than 20 per cent down.

When asked how they will come up with their down payment, 53 per cent of respondents said they will use savings accumulated over the years, while 46 per cent said they will take advantage of the First Home Savings Account (FHSA), and 29 said they will draw on their RRSPs using the Home Buyer's Plan (HBP). Twenty-five per cent said they will use a financial gift from family or an inheritance. Respondents were able to select more than one answer.

Forty-four per cent 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 per cent do not. Among those who don't believe they can buy in their current location, 40 per cent say they will have to travel more than 50 kilometres to buy within their budget, while 21 per cent believe they will have to search for a property within a 31-50 kilometre radius and 18 per cent say they would need to look within a 16-30 kilometre radius. Only 9 per cent of respondents are confident they could buy within 15 kilometres of their current location.

According to the Royal LePage 2024 Most Affordable Canadian Cities Report, 50 per cent of people living in the greater regions of Toronto, Montreal and Vancouver, say they would consider relocating to a more affordable city, if they were able to find a job or work remotely. Among renters in these regions, 60 per cent say they'd be willing to relocate, while 45 per cent of current homeowners say they would consider it.2

"We know that Canadians widely consider home ownership a worthwhile long-term investment and a quintessential part of the Canadian dream. So much so, that many are willing to relocate in order to make their home ownership dreams a reality. This is especially true for young Canadians and those who have remote work flexibility. I believe we will continue to see migration from southern Ontario and high-priced regions in B.C. to more affordable markets across the country in the future," said Soper.

Nearly a third of renters hoped to buy prior to signing their lease

Before signing or renewing their current lease, 29 per cent of Canadian renters say they considered purchasing a property. Among them, 41 per cent say the lack of a sufficient down payment led to their decision to rent instead.

"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.

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 per cent said they did not qualify for a mortgage. Respondents were able to select more than one answer.

"Earlier this month, the Bank of Canada announced its first rate cut in more than four years. Falling borrowing costs will lower the threshold to qualify for a mortgage, helping renters become owners. However, this creates a double-edged sword. Increased competition as they enter the market will put additional pressure on property values. While some will wait for home prices to become more reasonable, Canada's housing shortage will leave them waiting indefinitely," added Soper.

Rising rents and low vacancy rates

Nearly four in ten Canadian renters (36%) spend up to 30 per cent of their net income on monthly rental costs. Meanwhile, roughly the same amount of renters (37%) spend between 31 and 50 per cent of their income on rent, and 16 per cent spend more than 50 per cent. 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 per cent and 19 per cent, respectively. That figure dips to 10 per cent 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 per cent higher than a year prior.3 Vacancy rates sat at 1.5 per cent and 0.9 per cent, 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.

The 2024 federal budget, released on April 16th, announced several measures intended to more effectively protect tenants and strengthen their path to buying real estate. In addition to a renewed commitment to incentivize purpose-built rental buildings, a highlight was the creation of the Canadian Renters' Bill of Rights, which proposed a national standardized lease agreement and the disclosure of a property's rental price history. In addition, and perhaps most intriguing, this bill also proposed a recommendation for financial institutions to allow tenants to report their rental payment history to credit bureaus in order to better their credit scores, thereby strengthening their future mortgage applications.

Royal LePage 2024 Canadian Renters Report - Data Chart:
rlp.ca/2024-Canadian-Renters-Report-Chart

ATLANTIC CANADA

In Atlantic Canada, 28 per cent of renters say they considered buying a property rather than renting before signing or renewing their lease. Looking ahead, 22 per cent say they plan to purchase a property in the next two years, while 59 per cent will not.

"The rental market is shifting. Construction of purpose-built rental properties has drastically increased as the city's population continues to grow. Government programs and development incentives have encouraged the creation of new rental supply in Halifax. Newer buildings tend to attract newcomers who are not able to qualify for a mortgage right away, but want a high-quality place to live as they get established," said Scott Moulton, sales representative, Royal LePage Atlantic in Halifax, Nova Scotia. "We saw a wave of residents from Ontario and other parts of the country come to the East Coast during the height of the pandemic. And, as was the case in the resale market, rental prices were also pushed up as demand swelled. This mass migration has since died down."

Moulton added that institutional landlords are the predominant supplier of rental stock in the Halifax region, particularly downtown. Rising interest rates have not had a profound impact on property management companies who have been able to cope with elevated costs compared to smaller-scale or individual landlords.

According to the latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC), the average rent in Halifax for a two-bedroom unit in October 2023 was 11.0 per cent higher than a year prior.4 The vacancy rate in purpose-built rental buildings remained extremely low at one per cent.

Among renters living in Atlantic Canada, 29 per cent spend up to 30 per cent of their net income on monthly rent costs, while 38 per cent spend between 31 and 50 per cent of their income, and 24 per cent spend more than 50 per cent.

"There is a desire to build rental supply in Halifax, but permitting and application approvals are both time consuming and expensive," said Moulton. "More rental inventory is required to ease the region's housing supply shortage, but it will take many years for such buildings to be completed."

Royal LePage 2024 Canadian Renters Report - Data Chart:
rlp.ca/2024-Canadian-Renters-Report-Chart

QUEBEC

July 1st is known as moving day in Quebec, the province with the highest percentage of renters per capita in Canada.5 Leading up to this date, 28 per cent of Quebec renters say they considered buying a property rather than renting before signing or renewing their lease. Among them, 42 per cent say they are waiting for property prices to go down, 41 per cent are holding off for interest rates to decrease, and 37 per cent say the lack of a sufficient down payment led to their decision to rent instead. Respondents were able to select more than one answer.

Looking ahead, 22 per cent say they plan to purchase a property in the next two years, while more than half (58%) will not. Of those planning to purchase, 40 per cent believe they will be able to afford to buy a property in their current city of residence. Of those not planning to purchase a property in the next two years, 51 per cent say it is because they do not believe their income will allow them to afford the property they desire.

"The results of this survey highlight the challenges faced by Quebec renters in the current context of a housing supply shortage," said Geneviève Langevin, residential and commercial real estate broker, Royal LePage Altitude in Montreal. "However, the desire to become a homeowner persists for many, despite the financial obstacles, which is encouraging since this trend will continue to put pressure on public policy-makers to create housing that meets demand and population growth."

According to the latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC), the average rent in Montreal for a two-bedroom unit in October 2023 was 7.9 per cent higher than a year prior.6 Vacancy rates sat at 1.5 per cent and 1.3 per cent, respectively, for purpose-built rental buildings and condominium apartments.

While 2023 saw record low housing starts in Quebec, CMHC expects the province to see a more vigorous increase than elsewhere in Canada in 2024.7 However, new residential developments will remain too few to meet growing demand.

"The gradual easing of interest rates, which began with the first cut in the Bank of Canada's key lending rate on June 5th, should stimulate construction in the rental market. However, this expected increase in housing starts will not have an immediate impact on the province's housing supply," said Langevin. "I'm pleased to see that the various levels of government have begun to think together about alternatives for rapidly increasing housing supply. Unfortunately, the results of these concerted efforts will take time to materialize."

Royal LePage 2024 Canadian Renters Report - Data Chart:
rlp.ca/2024-Canadian-Renters-Report-Chart

ONTARIO

In Ontario, 30 per cent of renters say they considered buying a property rather than renting before signing or renewing their lease. Among them, 47 per cent say the lack of a sufficient down payment led to their decision to rent instead. Twenty-eight per cent say they are waiting for property prices to go down, while 26 per cent are holding off for interest rates to decrease. Respondents were able to select more than one answer.

Looking ahead, 31 per cent say they plan to purchase a property in the next two years, while nearly half (49%) will not. Of those planning to purchase, 43 per cent believe they will be able to afford to buy a property in their current city of residence. Of those not planning to purchase a property in the next two years, 61 per cent say it is because they do not believe their income will allow them to afford the property they desire.

"For many, renting is an inevitable step on the path to home ownership, as saving to buy a home in one of Canada's most expensive cities can take many years," said Gillian Ritchie, broker, Royal LePage Real Estate Services Ltd. in Toronto. "In recent years, we have noticed a much-needed increase in purpose-built rental supply in the city. Currently, Toronto's rental market is flush with one- and two-bedroom condos for lease, but does not have an adequate inventory of decent larger units or freehold rental accommodations. This has made it increasingly difficult for families to find suitable rental housing, whether they are waiting for the right time to buy a home or are looking for a temporary residence amid relocation or renovations."

Ritchie added that young professionals and students make up a large part of Toronto's renter demographic. Walkability is a top priority for renters attending post-secondary institutions, while others desire access to amenities, entertainment and their place of work.

According to the latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC), the average rent in Toronto for a two-bedroom unit in October 2023 was 8.7 per cent higher than a year prior.8 Vacancy rates sat at 1.5 per cent and 0.7 per cent, respectively, for purpose-built rental buildings and condominium apartments.

By comparison, the average rent in Ottawa for a two-bedroom unit in October 2023 was 4.0 per cent higher than a year prior. Vacancy rates sat at 2.1 per cent and 0.4 per cent, respectively, for purpose-built rental buildings and condominium apartments, according to CMHC.

Among renters living in Ontario, 35 per cent spend up to 30 per cent of their net income on monthly rent costs, while 36 per cent spend between 31 and 50 per cent of their income, and 18 per cent spend more than 50 per cent.

"Many investors bought rental units at the onset of the pandemic amid the record-low interest rate environment, and took advantage of low borrowing costs by purchasing multiple properties. As mortgage carrying costs have materially increased over the last two years, we have noticed some investors offloading their units, potentially reducing available rental stock," noted Ritchie. "Meanwhile, new developments are bringing more inventory to the rental market and putting downward pressure on prices in some communities. With rates now on the decline, we anticipate that many current renters will step into the resale market as the threshold to qualify for a mortgage begins to ease. However, further rate cuts are needed for this trend to fully materialize."

Royal LePage 2024 Canadian Renters Report - Data Chart:
rlp.ca/2024-Canadian-Renters-Report-Chart

MANITOBA & SASKATCHEWAN

In Manitoba and Saskatchewan, 44 per cent of renters say they considered buying a property rather than renting before signing or renewing their lease. Looking ahead, 36 per cent say they plan to purchase a property in the next two years, while 34 per cent will not.

"The pandemic was a pivotal turning point for the rental market. Before COVID-19, one-bedroom rentals were in high demand. Now, as working from home has become more common, renters' need for more space has grown. However, the desire to be close to downtown and have access to conveniences both within their neighbourhood and their rental buildings remains strong," said Laura Foubert, sales representative, Royal LePage Dynamic Real Estate in Winnipeg, Manitoba. "Winnipeg rental prices have increased over this past year as landlords and property managers aim to make up for price freezes implemented during the pandemic. Meanwhile, incentives like move-in bonuses, parking spots and top-tier amenities, are being offered on new developments to attract quality, long-term tenants."

Foubert added that many current renters are downsizers who have sold their homes and chosen to rent to avoid the upkeep of home ownership – many have no intention of buying another property.

According to the latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC), the average rent in Winnipeg for a two-bedroom unit in October 2023 was 4.4 per cent higher than a year prior.9 Vacancy rates sat at 1.8 per cent for both purpose-built rental buildings and condominium apartments.

By comparison, the average rent in Regina for a two-bedroom unit in October 2023 was 7.9 per cent higher than a year prior. Vacancy rates sat at 1.4 per cent and 1.8 per cent, respectively, for purpose-built rental buildings and condominium apartments, according to CMHC.

Among renters living in Manitoba and Saskatchewan, 50 per cent spend up to 30 per cent of their net income on monthly rent costs, while 36 per cent spend between 31 and 50 per cent of their income, and nine per cent spend more than 50 per cent.

"Some individuals are renting until they buy their first home, while others are renting purely because they enjoy the simplicity and convenience of the lifestyle," said Foubert. "Demand for rentals is expected to remain strong for the foreseeable future."

Royal LePage 2024 Canadian Renters Report - Data Chart:
rlp.ca/2024-Canadian-Renters-Report-Chart

ALBERTA

In Alberta, nearly a third of renters (29%) say they considered buying a property rather than renting before signing or renewing their lease. Looking ahead, 27 per cent say they plan to purchase a property in the next two years, while 45 per cent will not.

"The rental segment has been in transition these past few years. We came out of a balanced market that had healthy vacancy levels and robust demand, and headed into a crunch starting in the spring of 2022. We are now in a scenario where multiple offers on rental properties are being seen more frequently, a new phenomenon in Calgary," said Andrew Hanney, sales representative and property manager, Royal LePage Mission Real Estate in Calgary. "Demand for rentals in Alberta has been coming from all directions, including residents relocating from Ontario and British Columbia in search of a lower cost of living. One-bedroom apartments have some of the highest vacancy rates, as many renters are choosing to live in larger units with roommates in order to lower their monthly living expenses. This has created difficulties for families looking for multi-bedroom rental options."

Hanney added that purpose-built rentals were common in the 1980s and 1990s, but faded from popularity as developers focused their attention on building condominiums for ownership. Now, developers are creating purpose-built rentals once again, in response to increased market demand and a series of new government incentives.

According to the latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC), the average rent in Calgary for a two-bedroom unit in October 2023 was 14.3 per cent higher than a year prior.10 Vacancy rates sat at 1.4 per cent and 1.0 per cent, respectively, for purpose-built rental buildings and condominium apartments.

By comparison, the average rent in Edmonton for a two-bedroom unit in October 2023 was 6.4 per cent higher than a year prior. Vacancy rates sat at 2.4 per cent and 2.5 per cent, respectively, for purpose-built rental buildings and condominium apartments, according to CMHC.

Among renters living in Alberta, 39 per cent spend up to 30 per cent of their net income on monthly rent costs, while 34 per cent spend between 31 and 50 per cent of their income, and 17 per cent spend more than 50 per cent.

"Many young Albertans look at housing differently – for those who do not want the responsibility of home ownership, renting is an intentional choice, one that suits their needs and lifestyle," noted Hanney. "However, there remains an important cohort of Albertans for whom renting makes the most financial sense, while they save up to buy a home. As interest rates continue to fall, we will see more tenants move out of rentals and into home ownership."

Royal LePage 2024 Canadian Renters Report - Data Chart:
rlp.ca/2024-Canadian-Renters-Report-Chart

BRITISH COLUMBIA

In British Columbia, 26 per cent of renters say they considered buying a property rather than renting before signing or renewing their lease. Looking ahead, 27 per cent say they plan to purchase a property in the next two years, while 52 per cent will not.

"With a boost in rental supply in Vancouver, competition in this segment is improving, although affordability remains a challenge for tenants facing some of the highest rental prices in the country. Still, demand to live in one of Canada's most popular cities remains consistent," said Nina Knudsen, property manager,11 Royal LePage Sussex in North Vancouver. "Empty nesters and working professionals make up a significant portion of our renter demographic, as do tenants who are landlords themselves. It is not uncommon for renters to buy an investment property in a less expensive market and lease it out while they continue to save towards the purchase of a primary residence."

Knudsen added that tightening provincial legislation on rentals has caused some would-be landlords to step out of the market, a potential challenge for the creation of rental supply.

According to the latest Rental Market Report by the Canadian Mortgage and Housing Corporation (CMHC), the average rent in Vancouver for a two-bedroom unit in October 2023 was 8.6 per cent higher than a year prior.12 Vacancy rates sat at 0.9 per cent for both purpose-built rental buildings and condominium apartments.

By comparison, the average rent in Victoria for a two-bedroom unit in October 2023 was 7.9 per cent higher than a year prior. The vacancy rate in purpose-built rental buildings sat at 1.6 per cent, according to CMHC.

Among renters living in British Columbia, 23 per cent spend up to 30 per cent of their net income on monthly rent costs, while 42 per cent spend between 31 and 50 per cent of their income. Twenty-five per cent of renters spend more than 50 per cent of their net income on rent, well above the national average of 16 per cent.

"As interest rates have increased over the past two years, higher monthly carrying costs have put considerable strain on entrepreneurial landlords, prompting some to offload their units onto the resale market," said Knudsen. "With rates now beginning to trend downward, some investors may be seeing a light at the end of the tunnel. However, the most recent rate cut by the Bank of Canada will not be enough to encourage those landlords from selling their properties if further cuts are not made in the near future."

Royal LePage 2024 Canadian Renters Report - Data Chart:
rlp.ca/2024-Canadian-Renters-Report-Chart

Royal LePage resources for aspiring homeowners:

To help aspiring homeowners, Royal LePage has published a number of online resources available at the following links:

• From renter to homeowner: Your complete guide to home ownership in a competitive real estate market
• 8 new housing policies announced in the 2024 federal budget
• Real estate terminology 101
• Expert Q&A: What you need to know about buying a property pre-construction
• 6 tips for a seamless moving day
• Saving for your first home? Here's what you need to know about Canada's First Home Savings Account (FHSA)
• What is the Home Buyers' Plan?
• Get matched with Your Perfect Neighbourhood!

About the Survey

Hill & Knowlton used the Leger Opinion online panel to survey 1,506 Canadians, aged 18+, who rent their primary residence. The survey was completed between June 7th and June 10th, 2024. Representative sampling was done across all provinces (Atlantic provinces were aggregated). Weighting was applied to ensure representation between and within provinces, according to 2021 household renter census figures. No margin of error can be associated with a non-probability sample (i.e., a web panel in this case). For comparative purposes, though, a probability sample of 1,506 respondents would have a margin of error of ±3%, 19 times out of 20.

About Royal LePage

Serving Canadians since 1913, Royal LePage is the country's leading provider of services to real estate brokerages, with a network of approximately 20,000 real estate professionals in over 670 locations nationwide. Royal LePage is the only Canadian real estate company to have its own charitable foundation, the Royal LePage® Shelter Foundation™, which has been dedicated to supporting women's shelters and domestic violence prevention programs for 25 years. Royal LePage is a Bridgemarq Real Estate Services® Inc. company, a TSX-listed corporation trading under the symbol TSX:BRE. For more information, please visit www.royallepage.ca.

Royal LePage® is a registered trademark of Royal Bank of Canada and is used under licence by Bridgemarq Real Estate Services® Inc.

SOURCE Royal LePage Real Estate Services

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