Halifax rent prices to keep rising as more people can’t afford homes, report suggests

Rent prices in Halifax are expected to continue rising over the next couple of years, according to a new report from the Canada Mortgage and Housing Corp.

This comes at a time when experts say more and more people are being priced out of the housing market.

Kelvin Ndoro, a senior economics analyst for the CMHC, said it’s “very important” that Halifax increases its housing supply.

“More and more people are not able to go transition from rental into home ownership, so that’s putting a lot of pressure on the rental market,” he said, adding that Halifax’s vacancy rate is “among the lowest in the country” at one per cent.

In its latest housing market outlook, the CMHC said rental demand is strong, “owing to the sharp population increase in 2022 and the vacancy rate being at a record low.”

Rental housing is expected to remain in high demand, it said, “partly due to net immigration flows and households delaying the transition to homeownership.”

The report said Halifax’s vacancy rate is expected to increase this year, before falling again in 2024 and 2025.

“Rents are expected to rise further over the forecast horizon, as vacancy rates are still low and operating costs for property managers continue to increase,” the report said.

It noted that while rent cap legislation is still in place until the end of 2025, rents can still increase for new leases. The current cap is at two per cent but will increase to five per cent in January 2024.

“Property managers might also charge the maximum rent possible for newly built units in case further rent increases are limited by an extension of the rent cap legislation,” it said.

Home prices

The report said home prices have been falling since they peaked in April 2022, but are expected to stabilize and remain slightly above 2023 levels.

Housing starts are expected to decrease this year, “largely due to a decline in single-detached home construction.”

It said the inventory of completed and unsold single-family homes is trending upward, as higher interest rates are reducing buyers’ borrowing ability and leading to less demand.

But despite this, the CMHC said the inventory of homes for sale is still “critically low, keeping upward pressure on prices while demand stays strong.”

“More affordable homes are still selling above asking prices. Nova Scotia households have a lower debt burden compared to most provinces. This reduced sensitivity to interest rate hikes makes them likely to hold out for the asking price when selling,” it said.

It said home sales are expected to drop again this year in line with increased mortgage costs, but a rebound of sales is expected in 2024 and 2025 as economic conditions improve.

“While most of the major centres in Canada can expect to see a very big drop in prices, we don’t expect to see that in Halifax,” Ndoro said.

That’s because “we still have a relatively affordable market” compared with places like Toronto and Vancouver, “so that demand from people from those provinces — we can expect to see that in Halifax and keep prices up.”

Supply-and-demand not working

Jill Grant, a Dalhousie University professor emeritus of planning, said housing supply continues to be tight, with a small number of development and building companies controlling a decent portion of developable land in the area.

“I think the low supply of housing on the market here is very evident,” she said. “There’s hardly anything that comes up and when it does, prices are still fairly high.”

There’s some good news on the supply front — the CMHC says there were 1,700 new rental units completed in the agency’s 2023 reporting period, but the number of units under construction is 6,000.

But that won’t necessarily lead to lower prices. While the record number of new units under construction is expected to ease rental market pressure, rental prices are expected to go up over the next two years, with the average two-bedroom apartment expected to cost $1,780 in 2025, up from an average of $1,558 in 2023.

Grant said the “supply-and-demand” model of housing hasn’t been working since the province ended its own land development program in the 1990s.

“When the province was developing land, it was doing so in part with funds provided by CMHC to buy land and to finance development,” she said, adding that there was collaboration required from all levels of government to achieve social housing.

“There’s a real problem in terms of supply not being able to keep up with demand. This idea that somehow the market maintains a perfect balance is clearly not true,” she said. “Although demand is strong, prices are strong, industry is not keeping up with demand.”

While there have been “lots of approvals” given by planning departments in Halifax and across the country, Grant said there still isn’t enough housing being built.

Labour is one key issue in the construction sector, she said.

“But a lot of it has to do with monopoly in the industry,” Grant says. “The industry is set up in a way that it’s never going to oversupply housing; it’s too valuable of a commodity and gets produced at a slow rate.”