Investor Confidence and Stable Growth Continue in Multi-suite Residential Market in Q3 2024: Morguard

According to Morguard’s 2024 Economic Outlook and Market Fundamentals Third Quarter Update, sales of Canadian multi-suite residential rental properties surged during the third quarter due to, in part, an increase in availability.

“The multi-suite residential rental sector remains popular with a range of investment groups seeking attractive yields and stable and rising income streams,” said Angela Sahi, president and chief operating officer of Morguard. “While some buyers are waiting for borrowing costs to decline further, the continued easing of inflation and future rate cuts have created a solid foundation for Canada’s real estate market to strengthen starting next year.”

Economic output slightly exceeded expectations during the third quarter. The report says that the Canadian economy is also expected to expand modestly as the impact of elevated inflation and interest rates recede.

“The Bank of Canada’s rate cuts will be crucial to the real estate sector’s overall resilience, helping to drive the economic recovery from the effects of monetary tightening,” said Keith Reading, senior director, research at Morguard. “As the real estate market regains momentum, investor activity will increase in the second half of 2025.”

The third quarter saw a surge in multi-suite rental property sales, which marks the highest quarterly total since the first quarter of 2022.

An investment sales volume of $1.8 billion was recorded, with one week left in the quarter. Morguard says this jump can be attributed to an increase in large-scale property and portfolio availability. The report also noted that attractive Canada Mortgage and Housing Corporation financing supported the rise in sales activity.

Rent growth in the multi-suite residential rental market softened in the third quarter in comparison to the stronger gains seen in previous quarters. The average asking rent for all unit-sizes combined in the country’s 35 largest markets increased by a 5.4 per cent year-over-year in September, according to Rentals.ca. Rent growth is expected to continue to moderate in the near term.

Industrial property investment sales activity moderated in the third quarter, following an uptick in the previous quarter, with the slowdown mainly due to a shortage of property availability. New supply in the industrial leasing market continued to outpace demand, which is consistent with the trend observed over the past year.

In the third quarter, the Canadian office leasing market shifted into neutral gear with absorption rates varying significantly across regions. The Greater Toronto Area (GTA) recorded over 650,000 square feet of positive net absorption, while the Greater Vancouver Area had negative net absorption. Overall, tenants continued to show a preference for shorter-term subleases.

The Canadian economy was on track to expand by approximately 1.5 per cent in the second half of 2024 with a slightly stronger growth trend projected for the first half of 2025. This slow-growth outlook is mostly due to reduced household spending, higher rental costs, and continued softening in the job market.

Morguard noted that the economy is predicted to gradually strengthen in the second half of next year as the effects of higher interest rates subside, leading to improved domestic demand and consumer spending.

With inflation easing during the third quarter, the central bank is expected to continue cutting interest rates over the remainder of 2024 and in early 2025 while focusing on supporting the economy and labour market. As the central bank continues its rate-cutting cycle, housing market activity is expected to in 2025.