ON rental market is very active. In this article we'll cover how to find the best rental markets in Ontario!
But there are good places for rentals, and then there are fantastic places to own a rental property. Let’s take a look at how to determine the best rental markets in Ontario.
Let’s start off by addressing the main reason why the best rental markets in Ontario are so hot right now, which is demand vs supply.
Ontario is undergoing a massive population explosion, and it's directly impacting the rental market.
Finally, the government is starting to realize there is a problem with housing supply and the number of homes needed to make up for any shortages and to create enough supply for anticipated population growth (2.27 million more people over the next ten years.
The provincial and federal governments have set a target for Ontario: 1.5 million new homes in 10 years.
CMHC's June 2022 report estimated it could take 1.85 million more Ontario homes by 2030 to put prices at a level where 40% of the average household income would cover the costs for an average home, a level they consider affordable.
That’s 20% more homes than the Ontario task force estimated earlier in 2022.
Can we hit that target?
Looking back, Ontario has never built more than 700,000 new homes in a decade.
Housing completions have ramped up, but even still, the CMHC says if things continue the way we're trending, it gets us about 850,000.
That's 650,000 homes short of the provincial and federal target.
Demand looks like it will continue to far outpace supply. And the government doesn’t plan to slow down the population growth, which means supply needs to be prioritized if affordable housing is ever going to be a reality again in Southern Ontario.
And the high demand and low supply don’t only impact house prices. It also directly affects the rental markets. With more people moving to Ontario than new houses are being built, rentals are filling quickly. And as house prices go up, more people are renting long term too, increasing the demand for rental units in cities and towns across Southern Ontario.
Immigration as a whole is high in Canada, but the rental market is also being directly impacted by a growing number of international students coming to Canada.
In 2015, there was a total population of 219,143 international students in Canada. In only two years, from 2015-2017, the number of study permit holders rose by 45%.
Many of these students apply for permanent residency after completing their studies. Prior to 2017, international students looking to apply for citizenship were required to be a permanent resident in Canada for 4 out of 6 years. Yet, with the new law, they are only required to stay in Canada for 3 out of 5 years.
The easier process for international students to become a Canadian citizen will likely motivate many more students to come to Canada for their studies.
This is a whole population that is not traditionally looked at when considering new immigration, however, it is important to consider as it can be assumed many of these students will require a place to live while working towards their degree.
International students and their families are driving demand for real estate. Some have started purchasing homes for investment. Many others will rent while in school before making the leap into homeownership.
Student rentals are already a hot market around many universities and colleges, but with the growing number of international students, there is even more potential in these markets.
A growing population isn’t a guaranteed indicator of a hot rental market, but when population growth outpaces new housing developments in an already low-vacancy market, things heat up quickly. And that's a great indicator for the best rental markets in Ontario.
You want demand for your property.
As a tenant, having a ton of rentals to choose from is great. Less so for the renter trying to secure a tenant. If you’re trying to rent out one of dozens of similar homes in your neighbourhood, it can be hard to stand out. That’s why you need to find the best rental markets in Ontario, that have low vacancy rates.
Vacancy rate simply refers to the percentage of rentals available compared to occupied units.
Many cities in Southern Ontario have very low vacancy rates.
Here are the vacancy rates in cities across Southern Ontario in October 2021 published by CMHC:
That’s compared to the average vacancy rate of 5.8% in the United States at the same time.
CMHC is a great source for finding a community’s vacancy rates, and if there is a reason for the high or low rate.
One of the big trends happening in Southern Ontario is the growth and opportunity in spillover communities. Neighbouring towns to the big cities that have been hot for years are now seeing a lot of action. As cities continue to become more expensive and vacancy rates stay low, people move further out.
If you’re looking for the best rental markets in Ontario, remember, you don’t always have to be the best. Often, it’s more important to focus on doing.
Investing in good rental markets that do what you need then to do is far better than waiting to figure out what's the absolute best market this year. As long as you’re looking for the basic principles that distinguish a community as a good place to invest, then you don’t have to overthink it.
The best rental markets in Ontario aren’t necessarily the new hot trendy spots to invest. They have long-term appeal. And that’s something Southern Ontario continues to see. The demand for rental units isn’t going to go away any time soon.
Want to learn how to find rental properties in emerging neighbourhoods? Click here to find the 3 key indicators to look for before buying.