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2180 Steeles Avenue West,
Suite 204, Concord,
ON, L4K 2Z5

Phone:     905-761-7001
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8 January 2019

Stress tests in Toronto are hitting renters too

It turns out that mortgage stress tests aren’t only influencing potential homebuyers in Canada. According to Ben Myers, founder of Bullpen Consulting, renters are also facing the rent growth, caused by the implementation of the new rules – even those who aren’t planning to make a purchase in the nearest future.

“We’ve seen a significant growth, especially after the introduction of B-20 rules, including the new stress test which has decreased credit availability and made people switch to renting,” – he says.

As you know, at the beginning of 2018, the federal government expanded stress testing even to uninsured mortgages.

In other words, if you apply for a mortgage, you need to qualify at a higher rate than you are applying for, even in case you can provide a 20% downpayment in order not to buy a loan insurance.

Although the influence on homebuying activity is clear, renters in Toronto also started feeling the impact, as potential buyers have to rent longer now, increasing the pressure on a tight rent market.

“People still need to live somewhere,” - noted Myers. “It’s not a choice between buying a house and staying with your parents. There are always the situations in between. And as they are not buying, the demand still goes somewhere. It goes to the rent market”.

That’s why Myers predicts a rent increase by 11% in the old city of Toronto for 2019 and by 10% in neighbouring Mississauga.

The recent monthly report made by Myers for rentals.ca shows that the average rent in November for a one-bedroom apartment in Toronto rose by 1% from October and reached $2,144 – right in line with the forecasts.

There are also other factors pushing rents higher: population gains, rent controls, strong job growth and restrictions on the construction of new units. “We’re becoming the victim of our own success,” - he says.

“More people want to live here, large companies expand their offices and create new jobs, but we are not balancing it with the necessary supply”.

 

 

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