Annual rent price growth in the Toronto area has reached a record pace as demand continues to outstrip growth in supply for the fifth straight quarter, according to a new report.
Urbanation, which provides data on the GTA condo and rental apartment markets, released figures for the second quarter of 2022 on Tuesday.
“The GTA rental market was as strong as ever heading into the peak summer months, which is sure to place further downward pressure vacancies and upward pressure on rents,” Urbanation president Shaun Hildebrand said.
Urbanation said the market “strengthened considerably” in the second quarter due to a reacceleration in population growth, near record-low unemployment, and a reduction in purchasing power as interest rates rise.
The average per square foot condo rent price rose 5.9 per cent quarter-over-quarter to a new high of $3.57 “with annual rent growth reaching a record pace of 16.7 per cent,” the organization said.
Urbanation said as the GTA rental market “fully recovered” from the effects of COVID and rents rose, the smallest and least expensive units saw the highest growth rates.
“After seeing rents fall the most during the first year of the pandemic as renters moved out of small spaces in the core, with rents down by as much as 24 per cent for studios as of Q1-2021, studio and one-bedroom units recorded annual rent growth rates of 25 per cent and 19 per cent, respectively in Q2-2022,” the organization said.
Studios were still down by one per cent, however, when compared to three years earlier.
The largest growth in rent compared to three years earlier were in units with dens, up by 6.4 per cent for one-plus-dens and 9.4 per cent for two-plus dens, Urbanation said, attributing that to renters seeking extra space while working from home during COVID-19.
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The report also noted that vacancy rates in the GTA declined to 1.4 per cent from 5.1 per cent one year ago and said new construction on rental units “almost completely stopped” in the second quarter.
There were 87 rental starts, down from an average of 1,916 during the previous four-quarter period.
“This occurred while 1,263 new rental units began occupancy, resulting in the largest quarterly decline in total rental inventory under construction since Urbanation began tracking the data in 2015,” the organization said.
“However, at 18,976 units, the number of rentals under construction remained near a multi-decade high. Furthermore, long-term interest in purpose-built rental development continued to grow as the inventory of proposed rentals that have not yet started construction grew to over 103,192 units in Q2, up from 88,258 units a year ago.”
Hildebrand said the drop in construction may be partly attributed to “data volatility,” but was also likely impacted by rising construction costs, delays in getting approvals, rising borrowing costs, and tighter lending conditions.
“With housing affordability at generational lows and continuing to deteriorate, it’s concerning to see rental demand and supply deviate so strongly,” Hildebrand said.
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