Canada’s two priciest rental housing markets rank moderately when mixed in with the largest urban centres in the United States. Newly released data for the second quarter of 2022 from Lee & Associates Commercial Real Estate Services pegs average market rent in Vancouver at USD $1,145 (CAD $1,468) and in Toronto at USD $1,113 (CAD $1,427), well below the U.S. index average of USD $1,640 (CAD $2,115).

Vancouver and Toronto recorded the lowest vacancy and cap rates among 33 surveyed markets, of which 31 are located in the U.S.. In fact, the Canada-wide vacancy rate, cited at 1.9 per cent, is 10 basis points (bps) lower than the tightest U.S. market, Santa Barbara, California, while the Canadian average multifamily cap rate of 3.6 per cent is just a notch higher the U.S. low of 3.5 per cent in San Francisco. Yet, market dynamics appear similar on both sides of the border.

"Canada-wide vacancy rate, cited at 1.9 per cent, is 10 basis points (bps) lower than the tightest U.S. market."

“The steadily rising cost of home buying has been keeping people in the rental market longer. Mortgage rates are up, and existing home prices reached a record median $407,600 (CAD $526,000) in May. Due to supply-chain disruptions and lengthening construction timelines, deliveries of new apartments have been flat,” the Lee & Associates report states. “With rent growth surging, investment capital has been pouring into the multifamily sector. Multifamily sales activity topped the four major real estate categories, and investors see rent growth remaining above the long-term average and the shortage of available housing not changing in the short term.”

Lee & Associates analysts report 9.2 per cent rent growth across the U.S. during the first half of this year — a pace that has nevertheless slackened from the 11.2 per cent growth of 2021. San Francisco, with a vacancy rate of 7.4 per cent, commands the highest average market rent at USD $3,092 (CAD $3,989). New York City, Boston, Orange County, California and East Bay, California round out the top five with average market rents ranging from USD $2,980 (CAD $3,844) in New York to USD $2,426 (CAD $3,130) in East Bay.

Rents are roughly comparable to or lower than in Toronto and Vancouver in six of the surveyed U.S. cities: Spartanburg, South Carolina; Indianapolis, Indiana; Saint Louis, Missouri; Cincinnati, Ohio; Omaha, Nebraska; and Cleveland, Ohio, which bottoms out the rankings with average market rent of USD $1,066 (CAD $1,375).


Currently, there are nearly 853,000 units of purpose-built rental housing under construction across the U.S.. With approximately 47,700 purpose-built units underway, Canada is adding the equivalent of 5.6 per cent of that new inventory in a country with a population roughly 11.6 per cent of the size of the U.S.

However, Toronto ranks seventh among the 33 surveyed markets with 25,185 units of purpose-built rental units under construction. New York tops the list with nearly 57,000 units under construction, followed by Dallas-Fort Worth, Washington, D.C., Phoenix, Atlanta and Los Angeles.

Together, Toronto and Vancouver account for 75 per cent of current Canadian construction. New construction in Vancouver is largely on par with activity in Chicago, at 10,606 and 10,815 units respectively. However, Vancouver’s in-progress complement is equivalent to 7.7 per cent of its existing inventory of purpose-built rental housing, while Chicago’s represents a more modest 2 per cent of existing stock. When viewed in relation to the status quo, Vancouver is also expanding at a greater pace than Toronto, where new construction amounts to 6.6 per cent of existing inventory.




Minto Apartment Real Estate Investment Trust, a multifamily owner, said it is benefiting from a booming market where rents are rising fast.  Ottawa-based Minto, which owns stakes in more than 8,000 suites, said it signed 667 new leases in the quarter and increased rents by 12.1% in those suites.

"Our financial performance continued to significantly improve as we capitalized on stronger urban market rental conditions," said Michael Waters, CEO of Minto, during a call with analysts to discuss second-quarter results on Wednesday. "Market dynamics have substantially returned to pre-pandemic levels."  With interest rates rising, home ownership costs have been driving people to the multifamily market and pushing up rental rates across Canada.  "It was our single largest quarterly gain since the first quarter of 2020, and there were solid gains across all our markets," said Waters. "These results reflect strengthening urban rental market conditions, underpinned by net immigration, a widening housing affordability gap and a return to school." said the average rent across the country for all properties in the second quarter reached $1,750 per month, a jump of 7% from a year earlier and a reversal of seven straight quarters of rental rate declines.  Net asset value per unit was $24.24 as of June 30, up 1% from the end of 2021 but down from the first quarter because of higher average capitalization rates, the REIT reported. The chief executive said the REIT is evaluating all properties across its portfolio.
"We are exploring the potential sale of certain mature stabilized properties," said Waters, who added while public companies are not in buying mode,  institutional and private buyers are in the market.

Jenny Ma, an analyst with BMO Capital Markets, noted cap rates have expanded across all asset classes but at different levels.  "Cap rates for multifamily remained the lowest across all asset classes on the back of favourable sector fundamentals, supported by record-high immigration levels, persistently-high ownership cost in urban centres, and the supply-demand imbalance," said Ma in a note to investors.

Ottawa-based InterRent REIT and Calgary-based Boardwalk REIT also reported changes in valuations based on International Financial Reporting Standards.
InterRent said cap rates across its portfolio rose to 3.83% in the second quarter from 3.82% a quarter earlier but like other multifamily REITs, it offset that decline by a rise in net operating income because of the improved rental market.


At all levels of the Canadian educational system, Canada draws a large number of overseas students. In fact Canada is the 3rd highest destination for students in the world.  There are many reasons why international students find Canada an ideal place for tertiary education, but the multicultural environment tends to be the strongest motive. Canada’s educational system is undoubtedly attractive; it gives international students an abundance of choices, from public institutions to private ones. Not to mention the degree programs that provide unrivaled academic expertise.

In a matter of ten years, the number of overseas students enrolled in formal programs increased from 142,170  in 2010/2011 to 388,782 in 2019/2020. As a consequence, the proportion of international students enrolled increased from 7.2 percent to 17.8 percent by 2019/2020.  Since the start of the pandemic students coming into Canada all but evaporated.  Most institutions turned to on line learning.

According to 2017 statistics from the National Statistics Office of Canada, 490,775 international students have been studying in 12 provinces and territories of Canada. Ontario hosts the largest number of international students in its universities, with more than 40 thousand international students located in this province.

During the pandemic 2020-2022 in place students stayed here and continued their education the best they could.  The influx of first year students for the last 3 years has went down to a trickle.  These students did not go to other places for the most part.  They stayed in their home countries and waited for things to re-open which they are doing.  Many went on line and picked up elective courses.

It is anticipated that over the next 12-18 months that the amount of foreign students here in Canada will double to over 600,000.  This will greatly impact the rental market as most students to not remain on campus after the first year.  This is just another demand pressure which will enter the apartment market over the next few years.




587 AVENUE ROAD - TORONTO - $9,600,000 / $417,390 Per Suite / 2.80% Cap Rate

This is a 23 suite walk up rental apartment building along Avenue Road north of St. Clair.  It dates from the 1950's and is a concrete building with brick exterior, double windows, flat roof, no balconies and surface parking only.  The suites were renovated to a high caliber and are air conditioned.  The entire building including the envelope has been totally updated in the last five years.  There still was some rental upside but for the most part this property was fully stabilized.  The building was fully exposed to the market and was purchase by a private investor.

39 LEDUC DRIVE- ETOBICOKE –  $4,050,000 /  $311,540 Per Suite / 2.2% Cap Rate

This sale is of a 3 storey concrete walk up rental apartment building located in a strong rental market in Etobicoke.  There are 13 suites mostly one and two bedrooms and one suite has been totally renovated recently.  There is a brick exterior, double windows (2021), flat roof (2016), no balconies and surface parking only.  The building is heated with a hot water gas fired radiant system.  Tenants pay their own hydro.  Rents in the building are far below market.  There is a potential to covert some in building garages to suites.  The building was fully exposed to the market and was purchase by a private investor.

2841 KEELE STREET - NORTH YORK - $3,200,000 / $355,555 Per Suite / 3.0% Cap Rate

This property comprises an entry level rental apartment building from the 1950's.  It is a concrete structure with 9 suites of which 3 have been totally renovated.  This is walk up building heat with a gas fired hot water radiant system.  The building sold fully occupied with in place rents far below market.  There is on site laundry and surface parking only.  This is a low maintenance asset.  Tenants pay hydro.  The building was fully exposed to the market and was purchase by a private investor.

6 TISDALE STREET SOUTH - HAMILTON - $8,200,000 / $264,500 Per Suite / 4.6% Cap Rate

This is a purpose built rental walk up apartment investment comprising 31 suites.  The asset was well maintained with brick exterior, double glazed windows, flat roof and no balconies.  The building dates from the 1920's but was total gutted and renovated to condo quality in 2016.  There is laundry on site and tenants pay their own hydro.  The suites are large and are mostly 2 and 3 bedrooms.  This is a corner site with great curb appeal.   The property was fully marketed and purchased by a private investor.





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