GTA condo leases fell two per cent to 26,602 units in 2016, according to the latest condo market analysis from Urbanation. This marks the first annual decline recorded by the real estate consulting firm since tracking started in 2011. Urbanation attributes the drop in rental activity to occupancy delays for condos under construction, less rental turnover of existing stock, and an increase in resale activity.
Meanwhile, applications for new purpose-built rental development reached 27,812 units, an increase of 7,586 units in the past three months.
Despite a 34-per-cent year-over-year surge in final closings for newly completed condos in the fourth quarter of 2016, total rental listings fell by eight per cent, pulling down lease volumes by four per cent annually. With resale prices for condos up 15 per cent over the same period, more owners have become enticed to sell their units as opposed to holding onto them as rentals. At the same time, existing tenants have become less willing to move due to the high cost of renting in the open market. The share of the total inventory of condos that– was leased last year declined to 8.5 per cent from 9.3 per cent in 2015, while the share of total units resold jumped from 7.1 per cent to 8.1 per cent.
The average price of condo rents rose by 11.7 per cent year-over-year in the fourth quarter – the highest level of growth ever recorded by Urbanation, and a dramatic acceleration from the 4.2-per-cent increase recorded one year ago. Part of the increased rate of growth was caused by a shift in lease activity to the former City of Toronto and relatively high rents achieved within newly completed buildings. Nonetheless, same sample rents grew by a significant rate of 7.3 per cent, as the average days on market dropped to 13 — down a full week from this same time last year.
“The under-supply of rentals in the GTA continued to worsen throughout the year, causing rents to surge alongside home prices and further deteriorating housing affordability across the region,” says Shaun Hildebrand, Urbanation’s senior vice-president. “While less pressure on rent growth may arrive in 2017 due to a temporary rise in new apartment completions, it’s become clear that more attention needs to be paid to building rentals over the longer-term.”
Condo rental market overview
Average rents reached a record $2.77 per sq. ft. in the fourth quarter of 2016 based on an average unit size leased of 719 sq. ft., equaling an average monthly cost of $1,990. Former City of Toronto rents averaged $2,134 ($3.13 per sq. ft.), while the Toronto suburbs of Etobicoke, North York and Scarborough averaged $1,857 ($2.47 per sq. ft.) and the 905 region averaged $1,739 ($2.22 per sq. ft.). Rents were up 12 per cent across most in the former City of Toronto, versus seven per cent in the Toronto suburbs and six per cent in the 905 region.
Purpose-built Rental Survey
Urbanation’s survey of purpose-built rental apartment projects completed across the GTA since 2005 (49 buildings totaling 8,484 units) reported a vacancy rate of 0.6 per cent, down from one per cent last year. The availability rate (units that are vacant plus those where the tenant has given notice) was 1.6 per cent, the lowest level recorded in the past two years. Rents across the sample averaged $2.49 per sq. ft., up five per cent annually. The inventory of purpose-built projects under construction totaled 22 buildings and 5,133 units in the fourth quarter of 2016, down by 183 units from the previous quarter and down 1,037 units from a year ago. The total inventory of proposed purpose-built rentals increased to 27,812 units, nearly three times the number tallied a year ago.