TORONTO – A new report by condo research firm Urbanation suggests Toronto’s condo market has become more renter friendly due to a glut of supply and shifting demographics.
Although the number of units rented in the first three months of 2015 grew by 11 per cent compared with a year ago, the report says new listings shot up by 21 per cent as a slew of newly completed condo units came on the market.
Meanwhile, average rents grew at a slower pace and even declined in some neighbourhoods – perhaps a surprising development in a city where the booming real estate market continues drive up already sky-high prices for homebuyers.
Condo rents grew by 1.1 per cent annually to an average of $2.37 per square foot across the city, but declined in several submarkets, including the downtown core, where they slipped by 2.1 per cent.
On average, renters in the Greater Toronto Area pay $1,790 a month to rent a condo unit, according to Urbanation. The average size of a condo in the GTA is 756 square feet.
Urbanation senior vice-president Shaun Hildebrand says population growth among people in their 20s and 30s, who comprise the bulk of the city’s renters, has slowed.
“The supply is coming at a time when some of the demographic forces are perhaps not as supportive as they were last year, and the slight reduction in interest rates may have caused some people to decide to buy instead of rent,” Hildebrand said.
Despite the fact that competition between landlords to fill condo units has gotten tighter, Hildebrand says he doesn’t expect a significant uptick in vacancies. Lower mortgage rates mean that investors who have purchased condo units in order to rent them out will have more flexibility to lower their rental rates, he said.
The statistics come just as the rental apartment market is poised to spike, after stagnating for the past decade while developers focused on building condo towers.
Urbanation says eight rental buildings containing a total of 2,458 units are currently under construction in the Greater Toronto Area, with another 34 projects containing 6,723 units proposed. That’s a 75 per cent increase over the number of rental units developed over the past 10 years.
Developers have shifted their attention to building rental apartments given low vacancy rates and rising rental prices in one of Canada’s hottest real estate markets.
Hildebrand says average rents have climbed 15 per cent over the past five years to hit a new peak, and many renters are willing to pay a premium in order to live in a new, well managed building.
“It’s starting to make more sense to build rental,” Hildebrand said. “The financials work a bit better and also with the reported vacancy rates being low it gives 1/8builders 3/8 a lot of encouragement that their units are going to be absorbed quite easily when they come to completion.”
It may seem dicey to build a large number of rental units just as average rents have contracted in some parts of the city, but Hildebrand notes that the bulk of the new rental apartments, particularly those still in the proposal stage, won’t be coming onto the market for several years, at which point the supply of new condos is expected to slow.