Will London’s high rent prices finally subside? (maybe)

A new snapshot of the market shows that average apartment rents in London remained relatively flat in August, with slower year-on-year growth compared to many other Canadian cities. The local numbers come as average asking rents for apartments, condos, houses and townhomes reached a record high of $2,117 across Canada in August. Our Jennifer Beeman reports.

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The average rent for a one-bedroom apartment in London was $1,800 last month, with rents for two-bedroom units coming in at around $2,133, according to the latest market report from Rentals.ca. The totals represent an increase of nearly 2 percent from the previous month and are close to the national averages of $1,879 for a one-bedroom apartment and $2,339 for a two-bedroom unit.

“London is in a special position compared to most other Ontario municipalities because it has a really strong history of rental development,” said David Isikoff, senior analyst at Rentals.ca.

Of the 35 Canadian cities in the monthly report, the cost of renting one-bedroom apartments in London was near the middle of the pack at 21. Average one-bedroom apartment rents in London were cheaper than other Ontario cities, including Burlington Guelph, Hamilton and Kitchener. .

Isikoff said the supply of units and moderate population growth in London compared to other areas was keeping rental prices down.

“Yon-year, we saw a 37 percent increase in the number of apartments on offer in London,” Isikoff said, adding that some of the additional listings were from private owners offering properties for rent. “On the purpose-built rentals side, we have also seen developers bringing new units to the market.”

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While many cities – including Hamilton, Ottawa and Toronto – saw a higher rate of year-on-year increase in one- and two-bedroom rental prices, averages in London were down about 2 per cent from the same month in 2022, the Rentals report said. .ca.

The year-on-year flatness in London rental prices in August could be the result of several factors, but the figures only reflect one month and should not be interpreted in isolation, an analyst says.

“We’ve had some construction completed in the first seven months of this year. Adding these products to the market would have helped stabilize prices a little bit,” said Steve Pomeroy, a consultant and professor at McMaster University’s Canadian Housing Co-operative.

“I think the number of international students or migrants generally coming to London has probably stabilized from the peak that we saw in 2021-22, so demand may have weakened a little bit. That would be one of the things that might explain that.”

Uncertainty about interest rates is impacting the rental market by hitting new supply, Pomeroy said. Builders may be reluctant to start building new units now if the cost of financing the project is uncertain. Pomeroy said the slowdown in housing construction now will be felt in the future.

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“Across the country generally, we’ve seen a boom in rental construction in the last four or five years,” Pomeroy said, adding that London’s strong history with purpose-built rental properties means the increase is less pronounced here.

“Now, for developers who are considering building rental units, suddenly interest rate costs and other rising construction costs have made the viability of rentals even weaker than they were.”

The Bank of Canada has raised its key interest rate 10 times since March 2022, and held the interest rate steady at five per cent in its most recent announcement on September 6. The next interest rate announcement by the central bank is October 25.

Rentals.ca’s latest snapshot comes just after the federal government announced it was eliminating the goods and services tax on the construction of rental units. Although the move is a “step in the right direction,” it will not lead to immediate changes in tenants’ prospects, Isikoff said.

“Over the last two or three years, there have been a lot of factors that have led to a decline in the number of new projects. Between the cost of labor, the rising cost of materials, the increase in development fees and of course interest rates, development has become less viable.

“Removing the GST is just the first step. There are still other things that provincial and local municipal governments will require to help push development in the right direction.

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