BURLINGTON, ON, Oct. 2, 2024 /CNW/ - New research released by the John Molson School of Business at Concordia University in partnership with Equiton, a leading private equity real estate firm, provides a fresh perspective on the future of Canadian rentals and housing affordability.
AI-Driven Insights into Key Factors Influencing Canada's Rental Market examines the long-term effects of population growth and other trends driving rapid rent increases and low vacancy rates across the country. Written by Dr. Erkan Yönder, Associate Professor of Real Estate and Finance, and his team at Concordia, the report aims to support the policymakers, investors, and innovators working to address the housing crisis.
Key takeaways:
- Rental rates will experience significant increases in major cities including Vancouver, Montreal, and Calgary. Estimates indicate the average two-bedroom monthly rent in Toronto will reach $5,600 (a 72% increase compared to 2023) in under 10 years.
- More supply doesn't necessarily lead to lower rents, defying traditional economic expectations. Rental growth in most major markets will continue to accelerate until annual housing completions reach approximately 6% of total dwellings. In the GTA, that is nearly six to seven times the levels achieved in 2023.
- In the GTA, annual housing completions must reach an astounding 11% of the total number of dwellings (nearly 10 times the rate achieved in 2023) before supply levels result in a reduction in rents.
- Elevated rent levels are largely driven by immigration. Findings show that a 1% increase in the share of immigrants in a market increases local rents by approximately 0.6%. Meanwhile, a 1% increase in non-permanent residents can increase local rents by 2%.
- Extreme demand is steadily driving vacancy rates toward 1% across Canada, adding pressure to an already serious situation.
"We saw a lack of in-depth analysis of Canada's housing crisis at the regional level and felt the need to address that," says Aaron Pittman, Senior Vice-President and Head of Canadian Institutional Investments at Equiton, which commissioned the research. "While the housing crisis is an issue affecting all Canadians, Dr. Yönder's AI-driven forecasts make it clear that a homebuilding approach that works in one region won't necessarily work in another."
Earlier this year, the Canada Mortgage and Housing Corporation identified the private sector as an important partner in addressing Canada's housing shortfall. The government agency estimates that the country must add 5.8 million new housing units by 2031, 2.2 million of which needs to be purpose-built rental. However, Yönder notes, new supply has historically fallen far short of the pace needed to meet demand.
"Canadian immigration and housing policies have been out of sync for decades," says Dr. Yönder. "This research helps create a roadmap showing where private investment, regulatory relaxation, and infrastructure improvements could have maximum impact in terms of creating new housing."
Dr. Yönder says that he expects to reveal the details of more upcoming research in collaboration with Equiton later this year. The research partnership was made possible through the Equiton Research Fund in Real Estate at the John Molson School of Business.
Find the full report at www.equiton.com.
Dr. Erkan Yönder is an Associate Professor of Real Estate Finance and serves as the Chair of the Finance Department at John Molson School of Business, Concordia University. With a primary focus on real estate finance, Erkan's expertise lies in commercial real estate and sustainable real estate. Erkan's research has found its way into esteemed academic journals and have secured multiple grants from renowned institutions such as the National Pension Hub (NPH) and the European Public Real Estate Association (EPRA). Notably, his research earned him the Nick Tyrrell Real Estate Research Prize in the UK and the distinguished Best Published Article Award from Principles for Responsible Investment (PRI), a United Nations-supported initiative. Erkan has had the privilege of presenting his scholarly work at some of the world's leading universities, including MIT, Yale University, the University of California, Los Angeles (UCLA), and Cornell University. Erkan received his PhD degree in Finance and Real Estate at Maastricht University.
Aaron Pittman, SVP, Head of Canadian Institutional Investments at Equiton, is an Institutional Asset Management Executive with a history of applying a multidisciplinary approach to help global asset management firms realize optimal partnership potential with Institutional clients. Aaron brings extensive leadership experience with a focus on Institutional knowledge, acumen, and strategic and tactical initiatives which are applied to solidify an investment management company's reputation as a high quality, globally competitive entity. At Equiton, Aaron is responsible for capital raise activities and business development as it relates to the distribution of the firm's investment strategies to Institutions.
ABOUT EQUITON
Canadian-owned and operated, Equiton is a leading private equity firm that delivers solid returns for investors. In addition to making private real estate investing accessible to all Canadians, Equiton is proud to educate and empower Canadians by funding independent real estate research, delivering expert insights, and driving advocacy as part of the Canadian Chamber of Commerce's Housing and Development Strategy Council.
SOURCE Equiton Inc.
MEDIA CONTACT: Kathy Gjamovska, VP, Marketing & Communications, [email protected], 289-208-0817
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