Private Canadian multi-residential apartments could represent a timely addition to client portfolios. In times of high interest rates and inflation, investors can turn to the asset class for its ability to achieve consistently higher total returns than Canadian bonds and equities, while offering significant insulation from the speculative pricing and volatility of public markets. It is in this current economic environment, coupled with home affordability challenges, that Canadian multi-residential apartments’ track record of providing investors with strong relative upside growth potential shines through.

Demand Drivers Creating Opportunity for Multi-Residential Apartments

1. Surging population growth 

Population growth across Canada will surge in the coming years, stoking further demand for multi-residential housing. The federal government has reiterated its plan to welcome 500,000 immigrants annually by 2025. Meanwhile, Canada’s share of international students and temporary foreign workers is also booming. Growth is not expected to affect all regions equally, as newcomers tend to settle in heavily populated major metros. 

Sources: Ontario.ca, Alberta.ca, StatCan (Edmonton), StatCan (Calgary)

2. Housing supply and affordability issues 

Canada is facing a housing shortage tied directly to its longstanding inability to create new housing supply in line with population growth. The entrenched supply-demand disparity among single-family homes has worsened with decades-high interest rates exacerbating upward pressure on home prices, limiting renters’ ability to transition to homeownership. A parallel surge in demand for rental accommodation is expected to outstrip supply by 120,000 units by 2026, quadrupling the demand for rental accommodation seen in 2023. Tight market conditions across Canada have pushed the average asking rent to a record $2,149 in September 2023. Through it all, rental apartments remain a comparably affordable and desirable alternative to ownership for residents seeking a lifestyle in areas where single-family homes may be out of reach. 

3. Popularity of rental living  

Homeownership in Canada is on the decline since hitting its peak in 2011. For many renters, economic headwinds have rendered the idea of homeownership impractical, but the fact is more Canadians report renting by choice. A recent national survey of approximately 20,000 renters found that 46% had a preference for rental living. When making the increasingly popular choice to rent, those who adhere to the popular rental lifestyle cite affordability, building services, a sense of community and eco-friendliness as important considerations. Rental property holders who recognize this and provide excellent amenities and value-for-dollar could see positive impacts on resident well-being, as well as their portfolio balance sheets.  

4. A new generation of financially stable renters 

In Canada, growth in rentership is highest among the baby boomer generation comprised of people aged 56 to 75. Baby boomers numbered more than 9 million in 2021 and made up the largest portion of the country’s homeowners. As this generation ages, many seek to tap into home equity to help fund retirement or shed upkeep-intensive single-family homes for a simpler lifestyle. Baby boomer renters are typically financially stable and prioritize amenities like communal areas, landscaping and security; conveniences like tenant apps and walkability; and a strong rent-versus-own proposition driven by today’s high-interest, high-inflation environment. 

5. Favourable government policy 

With attention focused on housing supply Canada-wide, political will at all levels of government is being directed at the creation of new housing units and the development of multi-residential apartments in particular. For example, the federal government recently removed the Goods and Services Tax on the construction of purpose-built rental housing. Soon after, the Ontario provincial government removed its portion of the Harmonized Sales Tax (HST) on purpose-built rental housing construction started between Sept. 14, 2023 and Dec. 31, 2030, and completed by the end of 2035. As such initiatives gather momentum, stock of modern, high-quality rentals can provide an attractive alternative to condo apartments for prospective and downsizing homeowners alike. 

Tapping into investment opportunities in multi-residential apartments 

 Amid these tailwinds, Canadian multi-residential apartments can provide investors with not only stable income but also the potential for strong capital appreciation as the demand for rental units continues to significantly outpace supply. The Equiton Residential Income Fund Trust (Apartment Fund) offers investors the opportunity to benefit from these substantial demand drivers by investing in a growing, highly selective portfolio of Canadian multi-residential properties and developments. With an eye to the future, Equiton’s experienced leadership team continues to seek out opportunities as new trends emerge. 

IMPORTANT INFORMATION: This communication is for information purposes only and is not, and under no circumstances is to be construed as, an invitation to make an investment in Equiton Residential Income Fund Trust (the “Fund”) or with Equiton Capital Inc. Recipients of this document who are considering investing in the Fund are reminded that any such purchase must not be made on the basis of the information contained in this document but are referred to the Confidential Offering Memorandum which may be obtained upon request.