How to REALLY find average rent for an apartment (Hint – It isn’t in the news headlines)

Looking for a place to rent? Buying your next rental property? The average rent in your neighbourhood is going to be a key factor to consider. Here’s how to read between the headlines to determine the average rental rate of the apartment you’re considering.

Greater Toronto Area condo rental rates shoot up another 11.2 per cent” – The Globe & Mail, July 12, 2018
Average residential rents reach a new monthly high in London” – Property Wire, August 8, 2018

Internet search results for “average rent” often lead to lists of headlines warning of neverending rising rents. Soon it seems no one will be able to afford anything. So, how can you dive past the drama to determine the true average rent for where you want to live or invest?

#1 – Understand where rental data comes from, and where it doesn’t.

We are in the digital age where information is just an online search away, right? Unfortunately, rental data in Canada is notoriously incomplete so it’s common to only see a part of the picture.

According to CMHC data, over 50% of rental units in Canada are owned by individuals, not big corporations. That’s right, most rentals are owned by people like you and me, and guess what? Individual landlord data is really hard to get.

The CMHC reports on rentals only once annually. You can find their most recent data here. But here is the big problem: the report doesn’t include statistics from individual landlords, only large-scale purpose-built apartment buildings. So, if you’re looking at renting a basement suite, or a unit in a triplex, CMHC data provides only a basic guideline.

The Canadian Rental Housing Index uses data from the long-form census to compile its rental information. As a result, it’s able to capture more information regarding private rental units. However, the Canadian long-form census was last done in 2016 – just think of how much has changed in real estate since then.

So where do you get recent, reliable statistics? If you are looking in a major centre like Toronto, Vancouver, Ottawa, etc. you’ll have a little more luck. Rental websites like PadMapper provide monthly Rental Reports based on their listing data which can be a helpful starting point.

But when you get right down to it, the most reliable data will come from those with boots on the ground in your target area: the real estate agents, property managers, and landlords.

#2 – Not all neighbourhoods are created equal.

Downtown, uptown, east side, west side, below or above the tracks. Most cities are a patchwork quilt of neighbourhoods, each with their own culture, reputation, and rental market. News headlines often ignore microeconomics to focus on the entire city as a whole. If you’re familiar with your city, you’ll understand not all neighbourhoods are created equal In some cities, it’s even common for rents to vary drastically by street— so dig a little deeper.

Source: City of London

When searching for average rental rates, dig down to the neighbourhood level. Research rental rates by postal code, not by city overall. Then cross-reference location with transit maps and distance to shopping and schools.
High-demand areas, locations close to transit hubs and access to popular amenities will demand higher rents than “up-and-coming” areas.

#3 – Read between the lines to learn whether your rental unit is “average.”

Looking for a rental unit with in-suite laundry, parking, or storage? What about all inclusive rent versus tenant-paid utilities? Look at rental listings online and you will quickly realize “average” is in the eye of the beholder.

Because rental rate statistics are inconsistent and often based on the average rates of large-scale apartment buildings, when you start digging a little deeper you’ll quickly see how widely rents vary.

In London, Ontario we’ve seen two-bedroom units vary from $700/month to well over $1,350— sometimes only streets apart. It can make uninformed tenants and landlords feel like there is no rhyme nor reason. You need to look past the rental ad headline to figure out what “average” really is.

The overall condition of the unit, in-unit amenities and who pays the utilities can make a world of difference. Base rent is just the tip of the iceberg with some properties charging extra fees for parking spots, communal paid laundry, and storage lockers. Areas with student rentals will also affect the “average” since units are normally rented by the bedroom for $400-700/month but listed under one lease. When you’re multiplying by three to six bedrooms, the average rate gets a dramatic boost. And be aware: none of these are accounted for in CMHC, the Canadian Rental Housing Index, or Padmapper average rental rate statistics.

Next Steps

The bottom line is simple. Ignore the dramatic headlines and incomplete online reports. Instead, do your own data analysis and dig deeper because not all areas or rental units are created equal. What amenities do you or your tenants need in a unit? What neighbourhood are you targeting?

Don’t have the time, skills or patience? Leverage those that know the area best; the real estate agents, property managers and fellow landlords. If you’re a landlord you’ll want to build a great team of knowledgeable people anyways. And if you’re a tenant ask your tenant friends, you’ll likely want to live close by anyways.

 

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