Key interest rate raised to 5%: CORPIQ concerned about impact on housing rental market

Montreal, July 12, 2023 -The Corporation des propriétaires immobiliers du Québec (CORPIQ) reacts to the announcement of a new interest rate hike. CORPIQ is particularly concerned about the effects of successive increases in the Bank of Canada's key interest rate over the past 15 months on the Quebec real estate market. Although this measure is intended to mitigate the country's inflationary pressures, it will have a detrimental effect on the ability of rental property owners to invest in the upkeep of their rental stock and, above all, to stimulate new housing construction in a context of imbalanced supply and demand. Over 70% of rental units were built more than 40 years ago, and vacancy rates are below 3% across Quebec.

"The pressure on Quebec's rental real estate market poses real challenges for tenants and private housing managers. Over the past 10 years, construction and renovation costs have soared by more than 54%, insurance costs are up 77%, and mortgage financing costs are now approaching 6%. With municipal and school property taxes on the rise, many rental property owners are finding themselves in a deficit situation, while current rent control mechanisms are poorly adapted to the effects of this situation. Take the example of a $600,000 mortgage on a 6-unit plex. The additional annual bill will now exceed $20,000 for a rental owner. Some landlords will find it hard to survive financially with the TAL (Tribunal administratif du logement) recommendations at around 3% ($30). Unfortunately, it is the condition of buildings that will be most affected by under-investment in maintenance. Governments must quickly agree on a concerted strategy to protect the rental housing stock and stimulate housing creation," explained Marc-André Plante, Director, Public Affairs and Government Relations.

It should also be noted that, according to a recent survey (July 2022) of CORPIQ members, nearly 60% have a variable-rate mortgage, and nearly 80% of these have a mortgage exceeding half the value of the property.

CORPIQ survey (June 2023): Rental landlords' optimism fails to materialize

Over the past few weeks, CORPIQ has conducted a survey of more than 850 rental landlords with close to 40,000 units under management across Quebec, to find out how they feel about the current situation. Quebec rental owners are very concerned about the future of the rental housing sector. Only 13.4% of respondents wish to launch a project to build new rental units in the short term. On a scale of 0 to 6 (0 being very pessimistic), the level of optimism is abnormally low: 1.55 out of 6. 75% of respondents rate the rental real estate environment in Quebec negatively. "Clearly, rental owners are not in a good frame of mind. Financially, the risks are currently too great to invest in real estate. The rigidity of the rules for building new housing discourages even the most optimistic, and the legal framework is no longer flexible enough to properly maintain the existing rental stock. We find ourselves in an impasse where the Bank of Canada's key interest rate increase is unfortunately putting the brakes on the good intentions of all housing partners," concluded Mr. Plante.

 

About CORPIQ

A non-profit organization bringing together 30,000 owners and managers who own nearly 600,000 rental units and condos, CORPIQ is the largest association to offer services to housing owners and to defend their interests, for over 40 years. It serves all regions from four offices with a total of 60 employees. Quebec landlords provide housing for 1.5 million tenant households, and seven out of ten of them own a duplex or triplex.

Information and interview requests :

Marc-André Plante

Director, Public Affairs and Government Relations - Corporation des propriétaires immobiliers du Québec

Cell: 514-249-1691

E-mail: maplante@corpiq.com