Growing rental market the perfect opportunity for investors

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Since 2021, the number of renters in Canada has increased over three times the rate of homeowners

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According to the Organisation for Economic Co-operation and Development (OECD), Canada now has the most expensive housing market among the G7 nations.

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OECD is an international organization that has been around for 60 years working to address social, environmental and environmental challenges and establish evidence-based standards.

With a home price-to-income ratio of 148.16 in the third quarter of 2022, it’s no wonder that Canada leads the way in costly housing. For comparison, that figure in Italy is 92.4.

It is also easy to understand why renting in Canada is at an all-time high. In 2021, two-thirds (66 per cent) of Canadian households were owned, which is close to the average in OEDC, 64 per cent.

Since that time, however, the number of renters in Canada has increased over three times the rate of homeowners. Interestingly, these renters come in all ages and backgrounds, but especially in baby boomers who live in smaller cities.

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Statistics from the 2021 Census tell the story, with nearly 5 million households across the country being rented, and renters accounting for most of the growth over the past decade.

What does it all mean? The market is hot right now for savvy investors who understand how to make the most of timing. It is likely that the renting-over-buying trend will continue for some time to come, with the lack of supply, affordability challenges, demographic preferences and other factors raising roadblocks to ownership.

This trend can be a win-win situation for both renters and owner/investors, considering the current 5.49 per cent mortgage interest rates (and keeping in mind that the 10-year average is 3.3 per cent). Look for great pre-construction deals with closings 2-5 years from now when the interest rate is normalized.

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But take advantage of the sharp incentive builders are offering today and reap the rewards years before closing. We are seeing promos covering maintenance and taxes for a limited time and builders who offer to roll back mortgage rates to those of 2021, or they are often offering cashback to cover these incentives.

Your buyer will benefit from not only the cashback but the normalized future rates. Rent-to-own is even making a comeback. Many buyers are choosing co-ownership to afford to get into the market. But they are jumping in through any means possible

Keep in mind, too, that Millennials are renting for longer periods of time than their parents and grandparents did. Remarkably, though, between 2011 and 2021, baby boomers became the fastest-growing group of renters.

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This means that investors have the spectrum of ages to rent to. Remember that Canada just welcomed a record number of immigrants in 2022, with even more expected this year. Usually, these newcomers rent for the first few years of living here.

Then let’s look at our aging population, which live in nearly a quarter of tenant-occupied dwellings in Canada. This is happening for numerous reasons. In the case of condominiums, older tenants can say good-bye to the worries of repairs and major maintenance and take advantage of beautiful amenities right in their buildings.

Single people of all ages find it more economical to rent, as they don’t have two incomes to rely on. It all adds up to NOW being a great time to invest in real estate.

Debbie Cosic is CEO and founder of  In2ition Realty. Visit www.in2ition.ca