Canada's Condominium Magazine

Landlords’ market: “any price goes” — shortage of inventory rentals in Toronto may bring back condo investors, despite rent controls

Not only is it expensive to rent an apartment or condo in the GTA area, it’s sometimes impossible to even be considered. The new Ontario rules that protect tenants only protect existing tenants from increases; new tenants are paying the price.


Landlords in today’s market are disqualifying people without allowing them to see apartments.


Some analysts (see below) blame the new rental control rules — which makes landlords ask for more upfront (instead of through annualized increases). Although the new rules prohibit evicting a tenant to bring in a higher-paying one, if a landlord has a new apartment or home — or one that is vacant — there is no limit on rent other than what the market will bear. Add to this a substantial increase in the volume of renters — people locked out of an expensive real estate market — and the rental market is definitely a landlord’s market. This is motivating some investors to buy new condos, and some existing homeowners to build basement apartments.

Landlords, who are renting to new tenants, are in the fortunate position to be able to ask for whatever they feel the market will bear. Some have standards higher than prospective employers, and a more-in-depth application process. They can also really pick and choose from tenants.

“You can thank rent controls for that!” explains the Toronto Market Report August-Sept 2017 from Remax [1] “Landlords know that tenants that stay and renew their lease are subject to annual increases of just 1.5% in 2017 and 1.8% in 2018. That is less than the annual increase in property taxes and utilities. Landlords are now asking more at the front end to offset future losses. In this market, as more people continue to move downtown but are being squeezed out of the buying market (thanks to more Government intervention with artificial qualifying mortgage rates), their only option is to rent.”

Tenants turned away without a “look see”

Being turned away without even a “look see” is a big issue in the rental market from the tenant’s point of view. For prime locations, the only rental offers being considered must come through agents, often with an “incentive.” On the other hand, if they do get in, they can look forward to minimal increases — small consolation.

Yet, all this signals a very strong incentive to potential investors in condominiums who invest with the view of renting. Even with the new rent controls from the Ontario Government, a new condo owner can set the rent for whatever the market demands — and then some.




Gross rental yield high, good news for condo owners

“The two-bedroom market has an entry point of $2700,” according to Remax’s Rental Commentary for August. “At the high end, include parking and a den, the figure becomes $3400. Three bedrooms are $4000 per month and higher.” This is obviously good news for a condo owner who wants to rent, or invests with the view to rent; bad news for tenants.

Only 8 other cities compete in the $4000 range worldwide, making Toronto (now tied with London, UK) — in the rental market — one of the top ten most profitable. The only markets that rent, on average higher, are:

  • Brooklyn, NY at $4075 average for 3 bedroom city centre
  • Boston, MA at $4187.27 average for 3 bedroom city centre
  • Oakland, CA at $4258.53 average for 3 bedroom city centre
  • Hong Kong, Hong Kong $5013.32 average for 3 bedroom city centre
  • New York city, NY $5853.27 average for 3 bedroom city centre
  • San Francisco, CA $6339.39 average for 3 bedroom city centre
  • Hamilton, Bermuda $6944.44 average for 3 bedroom city centre [2]

Just as with the previously heated real estate market, the new normal is to:

  • rent over list price
  • take multiple offers
  • accept incentives from potential renters.



Pressures on rent

The pressures that keep rent high are similar to the other world markets listed. The most striking reason is no-to-low availability. Some analysts are blaming rent controls, not only for the low availability but for the suddenly higher prices.

The bottom line is that it’s a landlords market for new tenants. The only ones protected by new rules are existing tenants. For condo investors who aspire to rental income, even the high prices of buying condominiums can be well worth it.


[1] Toronto Market Report August-September 2017 from Remax>>

[2] Numbeo data “Prices by City of Apartment [3 bedrooms] City Centre (Rent per month

Auberge on the Park-Tridel


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