It’s now clear that the early days of the pandemic were a rare opportunity to get a deal on rent. With the economy opening people resuming more or less normal life, rents are on the rise again.
Meanwhile, the cost of houses has fallen from its February peak and economists say it’s possible we could see declines of as much as 10 to 20 per cent. House prices are still way up from the level of two years ago, and rising interest rates have increased the cost of financing a purchase. But at least the pressure on house prices is easing, whereas rents are moving higher.
Rentals.ca says the average rent for all properties listed on the site increased 9 per cent in April on a year-over-year basis, to $1,821 from $1,676. Average house prices have been falling month by month since February, but rents are on the upswing. Rentals.ca says they’re below the pre-pandemic peak of $1,954 in August 2019, but well above the pandemic low of $1,676 reached in early 2021.
Price momentum in rentals can be seen in single-family homes and townhouses, up 2.2 and 3.8 per cent, respectively, on a month over month basis. Rented condo units were up 1.5 per cent and basement apartments 1.2 per cent. Rental apartments edged up just 0.3 per cent.
There are competing theories about why house prices shot up so much – was it lack of supply or overheated demand caused by low-interest rates and a pandemic-driven desire for space and independence? I believe demand was the main issue for housing, but also that a lack of supply is hurting renters. We need more affordable, dedicated rentals, as opposed to condo units rented by investor landlords.
Governments are working to ramp up the construction of all types of housing, but this will take time. Meanwhile, it looks like rental costs will keep rising unless the economy slows down.
The experience of 2020 reminds us of what happens when landlords lose pricing power. Rents actually decreased in some cases as tenants were offered deals to keep them from leaving. Flash ahead to spring 2022 and rents are the affordability hotspot in housing.
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Rob’s personal finance reading list
‘We can’t afford to go to work’
People across the country speak out about the stress they’re feeling as a result of soaring gasoline prices.
He’s buying stocks steadily
A New York Times investing columnist explains – clearly and with nuance – his thinking on buying stocks as markets fall. He’s doing it, but not everyone should. Now for some perspective on a key question dividend investors must answer: Prioritize a high yield or dividend growth? Stocks that increase their dividends tend to have lower yields.
Rebranding retirement
A no-nonsense discussion of whether it would be helpful for Gen Xers to reframe the term retirement to better reflect what their experience will be like after leaving the workforce. I think this rebranding idea is at least as relevant for millennials and Gen Z, given financial challenges like expensive housing and the lack of company pensions for most workers. Look for an upcoming episode of our Stress Test personal finance podcast for a deeper discussion of how retirement will shake out for today’s young adults. Now, for a look at 10 rules for retirement, and the idea of hiring a retirement coach.
Got bleach?
A surprisingly long list of useful, often money-saving things you can do with bleach, besides using it in your laundry.
Q&A
Q: I’ve always read that we should not invest money in stocks that we need to spend in the next five years. Yet there are no high-interest GICs available for registered education savings plans. Do parents just keep the RESPs for their high school-aged children invested in mutual funds or ETFs?
A: You raise an important point here about managing RESPs – when the beneficiary youth(s) get to high school age, you want to start lowering the risk level in the portfolio by moving money into safe parking spots like guaranteed investment certificates. If you deal with an online brokerage or independent investment adviser, you should have access to a variety of GIC issuers, at least some of them with competitive rates. If you deal with an adviser at a bank, you may find yourself limited to the bank’s own lineup of GICs. It’s unlikely these GICs will have top rates. Don’t get overly hung up on GIC rates, though. As a student approaches graduation, the priority in an RESP is to preserve what’s already there. Safety, first.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Five questions to ask an investment adviser when stocks are volatile.
The Money-Free Zone
One of my favourite record stores is Cheap Thrills in Montreal, where I several years ago picked up a compilation of obscure soul and R&B songs that included a cut called The World Needs Changin’ by Hank Jacobs and Don Malone. Presented because, whaddya know, the world still needs changin’. If you’re interested in the compilation, it’s called The World Needs Changing: Street Funk and Jazz Grooves 1967-1976.
Watch this
A video showing how gas prices in Canada compare to other countries
Tweet of the week
A financial planner and investing blogger on what’s seeing lately in portfolio reviews. Definite signs people got carried away in the pandemic wealth boom.
What I’ve been writing about
- Aghast at gas prices? These credit and debit cards help you punch back
- How to avoid a GIC risk that can take five years to undo
- The priced-out home buyer’s guide to falling real estate prices and rising mortgage rates
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Are your parents giving you money? • Why it’s time to stop shaming the renting lifestyle • Is now the right time to buy a house? • Why are young Canadians leaving the cities they love? • Eating in: How COVID has shifted our food spending • Crisis-proof your finances? • Can you afford to live downtown? • The cost of kids
- ✔️ The housing file: The housing boom is ripping apart the financial fabric of Canada • Shut out: A well-qualified millennial home seeker throws up his hands after losing multiple bidding wars • Big city housing affordability is over – now what? • She sold her Toronto house to retire somewhere cheaper, but it didn’t work • How young adults and the whole country win with a tougher mortgage stress test for home buyers • Can’t afford your house? It’s likely not your fault
- 📈 Investing: Robo-advisers have grown out of the novelty stage. Here’s help in finding one right for you • The 2021 ETF Buyer’s Guide: Best Canadian equity funds • The 2021 Globe and Mail online brokerage ranking: Who’s best for investing ... and answering the phone • Are these the stock market returns of a lifetime? • On the cusp of retirement and wondering about an ETF that pushes the limits on aggressiveness
- 💰 Your money: The five most important numbers for checking the health of your personal finances • Today’s freakishly low mortgage rates can’t last. What will pandemic home buyers do when they rise? • There’s a cost in money, isolation and family stress when seniors choose to remain in their own private homes • Taking CPP early can cost you $100,000 and limit your long term options • Fleeing the city for the suburbs? Watch out for higher property taxes, more cars and other costs
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob Carrick