Flux Capacitor
Active Member
If the Real Estate market crashes, and people loose there homes, will the rental market rise?
What are your thoughts?
What are your thoughts?
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Market Crash, will rents rise?
- Thread starter Flux Capacitor
- Start date
kEiThZ
Superstar
Not really. Generally speaking if you look at price-rent ratios, corrections have happened by prices coming down, not by rents going up. Rents are much more closely tied to income and can't rise for that reason. Prices, however, are dependent on other factors (like financing) aside from just income. So they fluctuate more.
WanderLust
Active Member
In America, rents have gone up astronomically. But this only happened rather recently, considering their housing bubble got pricked in 2006, and the tsunami of foreclosures took soooooooooooooo looooooooooong to even start materializing, it's still materializing, and not really up to full stream. But just in the last year to year and a half, rents have started suddenly spiking in key metropolitan areas Stateside.
So, if the same were to happen here, rents wouldn't spike at all, in fact, might just go down, especially for condo investors too scared to sell, and have to rent out their units and compete with thousands of other investors trying to do the same, similar to people trying to rent out their condos in Florida, and finding that they can't seem to find anybody to rent them out unless they drop the asking rents, because everybody is doing the exact the same, dropping their asking prices to score a renter.
But if the downtown lasted as long as it has in America, then expect after awhile that rents would then start going up, but that would foreshadow the bottoming of the free-fall and the beginning of a recovery.
So, if the same were to happen here, rents wouldn't spike at all, in fact, might just go down, especially for condo investors too scared to sell, and have to rent out their units and compete with thousands of other investors trying to do the same, similar to people trying to rent out their condos in Florida, and finding that they can't seem to find anybody to rent them out unless they drop the asking rents, because everybody is doing the exact the same, dropping their asking prices to score a renter.
But if the downtown lasted as long as it has in America, then expect after awhile that rents would then start going up, but that would foreshadow the bottoming of the free-fall and the beginning of a recovery.
marsh
Active Member
If people lose their homes because of a market crash, they probably will also be facing bankruptcy because the bank can go after everything, they are not limited to just taking your home (as in the US). In these circumstances people are not going to be able to afford high rents and as the previous commment made, rents are closely tied to income; aslo if there are glut of condo owners desperate to rent their units out - that will also depress prices. So I agree with the other comment as well. I'm no expert in investing but housing crash isn't going to be good for anyone - homeowners or people with rental properties.
interested
Senior Member
In the US and Florida in particular, the comments by Wunderlust and others are correct. Rents are increasing. The reason they are going up is also that mass numbers of people are still working, but credit is very tight so it is hard to get financing. This in turn is making people who would buy forced into the rental pool. This results in a larger rental pool.
Unless credit seizes up totally here, I agree with the others that rents will not increase much if at all and possibly may go down, especially if there ends up being a glut of condos on the market.
Unless credit seizes up totally here, I agree with the others that rents will not increase much if at all and possibly may go down, especially if there ends up being a glut of condos on the market.
js97
Senior Member
Rent in Ontario is a little more difficult to 'increase' due to our Landlord and Tenant laws. It would be interesting to see as the current Toronto rental market is sizzling hot with extremely low vacancy rates (even with such high ownership rates) .
cdr108
Senior Member
it depends when the residential rental unit was constructed.
not all units are subject to the LTA annually increase limits.
myblissfulhome
New Member
Ontario Rental Increase Exemption & General Information
That is correct. The guideline does not apply to residential dwellings first occupied on or after November 1, 1991; the rental rate is subject to verifiable current rental prices. This means that the government may stipulate a 1.2% increase for 2013 but you may be justifiable to increase it 3% since there are other units for lease at this "justifiable" price point. That being said it cannot be abused to evict a tenant by making the price point unaffordable or them forcing the tenant to move. Furthermore a landlord that owns a property that was built prior to can always submit a request to the board to review a higher increase (subject to specific terms or approval - http://www.ltb.gov.on.ca/en/Law/158161.html).
LTB 2012 Rent Guideline:http://www.ltb.gov.on.ca/stdprodconsume/groups/csc/@ltb/@keyinfo/documents/resourcelist/stdprod_088485.pdf
General Information On Rent: http://www.ltb.gov.on.ca/en/Key_Information/STEL02_111478.html
Bill Introduced to Legislate Rental Band Cap from 1%<2.5% (no more or less) http://www.oreablog.com/2012/01/province-introduces-new-rent-control-legislation/
That is correct. The guideline does not apply to residential dwellings first occupied on or after November 1, 1991; the rental rate is subject to verifiable current rental prices. This means that the government may stipulate a 1.2% increase for 2013 but you may be justifiable to increase it 3% since there are other units for lease at this "justifiable" price point. That being said it cannot be abused to evict a tenant by making the price point unaffordable or them forcing the tenant to move. Furthermore a landlord that owns a property that was built prior to can always submit a request to the board to review a higher increase (subject to specific terms or approval - http://www.ltb.gov.on.ca/en/Law/158161.html).
LTB 2012 Rent Guideline:http://www.ltb.gov.on.ca/stdprodconsume/groups/csc/@ltb/@keyinfo/documents/resourcelist/stdprod_088485.pdf
General Information On Rent: http://www.ltb.gov.on.ca/en/Key_Information/STEL02_111478.html
Bill Introduced to Legislate Rental Band Cap from 1%<2.5% (no more or less) http://www.oreablog.com/2012/01/province-introduces-new-rent-control-legislation/
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daveto
Active Member
The following graph suggest that US rents spiked about 5% from 2006-2009, dropped back down, and have recently been increasing.
But a 5% increase (net of inflation) over 6 years seems fairly modest to me.
http://eyeonhousing.files.wordpress.com/2012/08/real-rent.jpg
http://eyeonhousing.wordpress.com/
I agree with others who stated that rents tend to be sticky as they are typically closely aligned with income. I've posted other graphs showing that Canada rents have been flat over the past 30 years, even through the RE booms and busts of the 1980s.
But a 5% increase (net of inflation) over 6 years seems fairly modest to me.
http://eyeonhousing.files.wordpress.com/2012/08/real-rent.jpg
http://eyeonhousing.wordpress.com/
I agree with others who stated that rents tend to be sticky as they are typically closely aligned with income. I've posted other graphs showing that Canada rents have been flat over the past 30 years, even through the RE booms and busts of the 1980s.
brockm
Active Member
Not likely. What's likely to happen with a lot of investment condo stock, if those people exit and that part of the market collapses, you'll see property management companies swoop in and buy up tons of units at the depressed prices. And the rental stock will actually probably expand.
You also can only charge for rent what the market will bear based on incomes. Unlike with sale prices which allow people to leverage themselves up many times their net worth.
Regular
New Member
It would stay the same.