Toronto-area renters are once again facing a compressed rental market similar to what they experienced before the pandemic, according to two reports released Tuesday.
Market research firm Urbanation says the vacancy rate for new purpose-built apartments fell below 2%, while condo rental prices soared 15.8% annually in the first quarter. of this year.
This rent growth, in addition to a 3.1% quarter-over-quarter increase, was the fastest rise in condo rents Urbanization has seen since it began tracking rental rate in 2010, she said Tuesday.
After stagnating during the pandemic, the rental sector is poised to grow as soaring property costs, rising immigration and interest rates are fueling demand for apartments, the president says of Urbanization, Shaun Hildebrand. These come on top of rising inflation and near-record unemployment — factors that typically push vacancy rates down and rents up.
“Unfortunately, even with the sharp increase in completions (of apartments and condos) that we expect this year, it looks like affordability for renters is likely to deteriorate,” he said.
“Condo rents generally increase very little, if at all, between the fourth quarter and the first quarter,” Hildebrand said.
“But with the recovery accelerating; more pandemic-related restrictions lifted; population returning to the city and obviously housing prices skyrocketing in the first part of the year, I think rents received a bigger than normal increase in the first few months of 2022 “, did he declare.
Urbanization’s first-quarter report showed GTA condo rents are at their highest level since the fourth quarter of 2019. A 710-square-foot unit commands an average rent of $2,396.
Rent growth in the area has been led by the City of Toronto over the past year, which has seen a 16.8% annual increase. But the cost of these units is still 0.9% lower than it was two years ago. Over the same two-year period, rents in communities in the 905 area increased by 7.7%.
Rising demand also pushed rental prices up 4.1% year-over-year in the first quarter in purpose-built apartments since 2005. This does not include newly completed units that have tendency to charge higher rent.
While 70% of these apartment buildings offered incentives such as rent reductions a year ago, only 45% used such incentives in the first quarter of this year.
Another report, from Rentals.ca, also shows Toronto’s rental market returning to pre-pandemic conditions, with rents jumping 11% a year for a one-bedroom apartment in March and 16.2% for a two-bedroom apartment, although there was a 1% drop in prices compared to February.
Nationwide, rents rose 6.6%, according to the National Rent Report, which is based on listings posted on the website. Toronto, which saw a 14.3% year-over-year increase in March to $2,326 for all property types, was trailing only Vancouver for Canadian prices. In Vancouver, rents have increased by nearly 30% to almost $3,000 per month.
Urbanation reported that there were 118,203 purpose-built apartments under construction or in the planning stages in the first quarter of this year. There were 25% more under construction than a year ago, but only 7,684 are expected to be completed in 2022.
Although that’s more than double the 3,461 that were completed last year, only a small fraction of the total projects have been approved, Hildebrand said. As governments look for ways to boost housing supply, they must pay particular attention to rentals, he said.
“They’re taking a long time to go through the planning process and, really, find a way to get these units built, because that will hopefully end up bringing us into a more balanced market where we don’t have to see such aggressive things as rent hikes.”
A vacancy rate of three to four percent is considered a balanced market, Hildebrand said.
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