Condo rents in the GTA are rising, and vacancies are low, but according to Urbanation Inc.’s Q2-2018 rental market data analysis, the good news is an increase in new purpose-built rental buildings.
The report, released on July 12, shows the average rent of a 732-sq.-ft. unit was $2,302, an 11.2-per-cent increase in Q2-2018, compared to Q2-2017. Broken down by unit size, however, average rents for studios and one-bedroom units without a den saw the greatest increases at 12 per cent ($1,720) and 13 per cent ($1,968), respectively.
“Current rental supply has fallen to a critically low level,” explains Shaun Hildebrand, president of Urbanation, a company that provides information and analysis on the Toronto condominium market.
“Demand has been pouring into the market while rental construction still remains relatively low, condo projects are taking longer to reach completion, not as many investors are offering their units for rent, and tenants aren’t moving as often.”
The condo rental market
The number of condo leases signed declined eight per cent for the third straight quarter to 7,754 units, as supply continued to drop. Lease activity also slowed because people are staying in their units longer. In the year ending Q2-2018, a total of 25,955 units were leased through MLS, the lowest 12-month total in three years. As a share of the entire stock of condos in the GTA, 7.8 per cent of units changed hands in the rental market during the past year, the lowest annual level of turnover in five years.
The 85 per cent ratio of leases-to-listings remained well above the Q2 average of 78 per cent since 2011, while average days on market remained at 15 days, with only two weeks of supply available at the end of Q2.
The $231 average increase over the past year was the largest ever recorded by Urbanation, with rents rising by $367 in two years. In the City of Toronto, average rents grew by 12.1 per cent to $2,379 ($3.33 psf), including a 13.5-per-cent increase in the former City of Toronto to $2,505 ($3.61 psf). In the 905 region, condo rents increased 9.2 per cent to $1,998 ($2.49 psf), with 11.9-per-cent growth in Mississauga to $2,105 ($2.63 psf).
Purpose-built rental buildings
New purpose-built rental construction surged in Q2, with 2,635 starts recorded during the quarter, raising the total inventory under construction to 11,073 units — the highest in at least 30 years. The number of planned rentals also grew, totalling 120 projects and 37,403 units, nearly doubling in size over the past two years to reach the highest level recorded by Urbanation since tracking began in Q1-2015.
Operators of rental buildings completed since 2005 in the GTA raised rents for available units by 11 per cent compared to last year, reaching an average of $2.97 psf. Vacancy rates in these buildings averaged 0.3 per cent, with an availability rate of 1.5 per cent. During Q2-2018, new applications totalling 5,920 units were proposed for purpose-built rental development, nearly 3.5 times greater than the number of new units proposed a year ago (1,719), which came after the expanded rent control rules to include new units.