Canada's Condominium Magazine
The average vacant condo is rented within 10 days, at an average rent of $2,219.
Ontario’s new rent controls, expanded to include newer buildings, is partially to blame for record high rent being asked by landlords across the city. With caps on rental increases for renewing tenants, landlords are making sure their initial rent is high enough to cover costs and profits. They’re also being pickier about who they rent to.
Yet, despite this, average time on market is barely 10 days. All of which has driven the average rent in Toronto to $2,219 per month for a 743 average square foot condo. [Data according to research company Urbanation.]
Many tenants complain prospective landlords won’t even allow them to view the condo units; landlords counter that there is just so much demand they have to be selective.
In other words, it’s a “landlord’s market.”
“The intense competition between renters in Toronto shows no signs of letting up in the near future,” said Shaun Hildebrand, senior vice president with Urbanation. “While it’s encouraging to see that rental proposals are still coming in, the level of new development needs to ramp up significantly in order to meet demand.”
Ontario Fair Housing Plan partially to blame
In a move to protect tenants, Ontario moved to cap rent increases for renewing tenants. There is no mechanism, however, other than free-market and demand, for setting front-end prices on new leases. Landlords, afraid they will lose money at a 2.5 percent annual cap, are front-end loading rent. In the free market, with a rapidly increasing pool of tenants and a declining inventory of rentals, the Landlord controls the market. While this can be difficult for tenants, landlords have no choice, given the new restraints.
“All indications point towards a decline in vacancy rates in Toronto over the past year,” said Urbanation, in its release.
Other aspects of the Ontario Fair Housing Plan likely exacerbated the problem by putting prospective buyers into “wait-and-see” mode as they follow the market — and putting them back into the rental market. Higher mortgage rates also pulled some prospective owners out of the market and back into the rental market. Those, who already have rented homes are staying longer, further hampering inventory.
“This has been compounded by lower rates of tenant turnover, which has been further encouraged through the extension of rent control, and a slowdown in completions of condominium and purpose-built rentals,” the company says in its release.
Over 7,761 leases in 3rd quarter
A total of 7,761 leases were signed in the 3rd quarter, nearly the same as last year, but supply has sharply dropped. According to Urbanation’s research, the “volume of one bedroom without den rentals, about 500-599 square feet in range, dropped by 11 percent from a year ago while studio rentals fell by three percent during the period.”
As reported previously in Condo.ca, some purpose-built rentals are being converted to condos due to the new rules restricting rental increases, reducing the expected pool of future rental homes. [See story here>>]
The pipeline is dwindling
The report indicates that the total inventory of purpose-built rental projects in the GTA reached 30,980 in the third quarter, the same as the previous quarter, but expected to decline in future.
“The 1,875 new units proposed during the past three months was mostly offset by the movement of some projects out of the proposal stage and into the construction phase, as well as the conversion of some projects to condominium following the introduction of rent control to new units,” the report maintains.
“The inventory of units under construction is set to decline by the end of the year as 1,681 units are scheduled to reach occupancy during the fourth quarter.”