Canada's Condominium Magazine
Vacancy rates are even lower for condo rentals in Toronto at 1.2 per cent than for regular apartments, despite the fact that condo units command 30–40 per cent higher rents.
The vacancy rate in the Toronto rental market was up a little this fall, according to Canada Mortgage and Housing Corporation’s fall rental report. Up a little but still low, at just 1.7 per cent. Of the apartments that are available, a large portion (22.6 per cent), is in the form of condos. The vacancy rate among condo apartments in Toronto was just 1.2 per cent in October 2012, CMHC reports.
Condo construction has outstripped rental apartment construction quite significantly in Toronto, though CMHC says that rental construction has been “strong.” New apartment construction now accounts for less than 10 per cent of rental accommodation in Toronto. Without the “secondary” market of condo rentals, it is hard to imagine what renters would do. Apartments that do come available are often rented again the same day.
Worth noting is that rents for condo apartments are typically 30–40 per cent higher than for ordinary rental apartments. A one-bedroom in a purpose-built rental building would cost, on average, $1,007 in Toronto. In a condo building, a one-bedroom would go for $1,436.
Both global and local economics are behind the ebb and flow of the rental market, with upward pressures on vacancies countered by downward pressures.
What the report calls “modest” job growth in the area was one of those upward pressures. If you are young, between the ages of 18 and 24, and unemployed, there’s a very good chance you live at home with the parents, not in a rented apartment, where you really want to be.
Also, with fewer migrants arriving in Ontario, and more out-migrating to other provinces, there were fewer people looking for a place to rent.
A third factor contributing slightly to higher vacancies was the completion of new rental properties. CMHC says that rental construction has been “strong” in recent years, and while the impact of that construction was not large, among higher-end properties the vacancy rates tended to be higher.
On the downward side of the see-saw was the persistence of global economic uncertainty, which tends to foster “risk-averse behaviour” in the financial markets and, through a kind of spillover effect, by individual consumers. In other words, when the economy sputters, people don’t buy big-ticket items. And they look for cheaper accommodation, so demand for lower-priced rentals grows.
With housing affordability rising to levels beyond the reach of many, renting becomes the only real alternative to ownership for some, driving demand and lowering vacancy rates. This is especially true for that demographic group that normally drives the first-time buyer market, those aged 25 to 44. Since they typically rent before buying for the first time, the uncertain economy, coupled with declining affordability, tends to make them postpone purchasing a home and continue to rent.