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Rising interest rates: Rate of increase for major work also on the rise?

Rising interest rates: Rate of increase for major work also on the rise?

With inflation that continues to rise, building material costs that fluctuate every day upwards, and the lack of labour, it is now the turn of interest rates to increase significantly and very closely following the other increases.

Economists had predicted an increase of 0.75% on July 13 but it was 1% more that was announced by the Bank of Canada. Now the key rate is 2.5%.

Of course, these increases in the interest policy rate, which do not seem to have been the last ones yet, have an impact on households that have a mortgage to pay off or on personal loans taken out.

Certificates are also experiencing rate increases. Take the 5-year Guaranteed Investment Certificates which is used for the calculation of rent increase according to the Administrative Housing Tribunal (TAL): the rate has increased from 2.95% as of July 13, 2022 to 3.45% as of July 20, 2022.
At the beginning of 2022, on January 5, this same certificate was at 1.25%.

This is good news in itself for rental housing owners because we can expect that in 2023, the rate granted by the TAL, will be higher than the last 10 years.
Remember that in 2022, the rate is 2% or 50 years to recover your investment!
According to the preliminary calculations of the APQ for the first 6 months of 2022, the rate of increase would be 3.2%.

But is this really good news?
In the context of a strict and 40-year-old rent increase calculation mechanism, it can be said that having more than 3% is good news.
But compared to new mortgage rates, maintenance costs, all building expense items that experience inflation of more than 7%, this is unfortunately not enough to compensate.

The maintenance of buildings and the safety of their occupants must be a constant concern, but also the only one that should guide aid given to the population.
Most of Quebec’s rental stock is more than 40 years old. Of course, a lot of work needs to be done to bring it up to current standards.

In addition to security, in a context of housing shortage, leaving available housing unrented because work is required in them is simply the opposite of possible solutions to reduce this crisis.

In the latest APQ survey, at the end of June 2022, according to respondents, 29.74% have problems having this work carried out in order to put the dwelling back up for rent quickly.

Among the causes stated, it appears that the context of labour and the meteoric rise in the prices of materials are responsible. Several challenges are facing rental housing owners:
Building material prices: 49.61%
Availability of construction material: 40.16%
Lack of cash: 34.65%

To get through inflation, the spending increases, and avoid a recession, the government must intervene!

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Québec Landlords Association

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