Rents in Canada’s big cities appear to falling fast and that poses a risk to home prices, says a new report by Capital Economics.
Toronto and Vancouver, which receive the most new arrivals and have the highest share of short-term rentals, face the worst declines, Capital said.Toronto normally gets an average of 12,000 new residents a month; the absence of those arrivals could leave at least 3,000 apartments vacant. “That represents a big risk for house prices,” said Capital economist Stephen Brown. “Many recent investors reportedly already faced negative cashflows as rents were too low to cover all their expenses. With rents now falling, some may sell properties, which could cause a drop in house prices in excess of the 5% we have pencilled in.”Retail sales data come out tomorrow, but a real-time look at how Canadians are spending their money has already revealed a few green shoots amid all this gloom.
While spending was down nearly 30% overall in April, there is a sharp uptick by mid-month that brings levels up to about 15% below pre-pandemic levels by the end. Encouragingly, spending on household goods, which saw declines of almost 20% at the beginning of the month, are now about 20% higher than pre-pandemic levels. Spending at department stores and on electronics is also higher than before the crisis. And spending on software and data has soared from the end of March to almost 80% higher than pre-crisis.Was this newsletter forwarded to you? Sign up here to get it delivered to your inbox.
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