AVERAGE MONTHLY RENTS DOWN IN TORONTO, GTA
Average monthly rents in the top 14 cities and former municipalities in the Greater Toronto Area declined in May, according to the latest TorontoRentals.com and Bullpen Research & Consulting Toronto and GTA rent report.
The former City of Toronto saw rents dip 0.3 per cent month over month from $2,387 on average in April to $2,380 in May, following a more steep drop of 3.9 per cent the month before.
Average rents have declined by 6 per cent to 10 per cent annually in North York, Markham, Mississauga, York, Oakville, and East York. But a few areas are still up year over year for average monthly rent including Brampton, up 3.5 per cent; Richmond Hill, up 2.8 per cent; and Milton, up 0.3 per cent.
It is too early to call the bottom of the GTA rental market, but a recent study by Ryerson Centre for Urban Research and Land Development showed that the Toronto Census Metropolitan Area is the fastest growing metropolitan area in the United States and Canada, and the City of Toronto remains the fastest growing central city based on 2019 population statistics.
“It is likely that there is significant latent rental demand from young adults living with their parents, 30-somethings living with roommates, and retirees looking to downsize to an urban apartment,” said Matt Danison, CEO of Rentals.ca. “Rental rates may not fall further, because demand for rentals is expected to pick up as the lockdown ends, recent graduates start their careers, people cooped up with family or roommates look for their own place, and the border opens up to foreign students, temporary residents, contract workers, and immigrants.”
And, as the COVID-19 pandemic continues to impact housing decisions, tenants are starting to research properties again. Pageviews for rental listings on TorontRentals.com are up month over month in most of the postal codes in the central GTA in May.
According to data from Canada Mortgage and Housing Corporation, 9,549 rental apartments were under construction in the Toronto Census Metropolitan Area (CMA) at the end of May. As the chart below shows, rental apartments under construction have generally been trending up for the last 20 years (orange line).
In terms of rental apartment completions (blue area), there were 1,444 in July of 2019, more than any year from 1997 to 2007. There were 3,372 total completions last year, the most since 1993.
The slowdown in construction associated with COVID-19 has likely delayed the completion of at least a couple of rental apartments in the CMA this year, with 1,074 completed through the first five months of 2020.
A number of relatively new rental apartments have units listed on TorontoRentals.com . The chart below lists a selection of those projects with their average 2019 rent, versus their average year-to-date rent this year.
Average rental rates have decreased in 13 of the 18 projects with data available in both 2019 and 2020.
Even with these highly desirable new projects with all the bells and whistles, security of tenure, and professional property management, rents have been lowered and incentives like a free month’s rent offered.
“There continues to be increased interest in rental apartment development among real estate investment trusts, institutional investors and forward-looking developers,” said Ben Myers, president of Bullpen Research & Consulting. “However, given the current state of the economy and shift in tenant demand, the development industry and its financial partners will have to reevaluate its revenue assumptions and forecasts, which will likely result in fewer rental projects starting construction during the rest of 2020 and well into 2021.”
Other takeaways from the May Toronto and GTA Rent Report include:
- The average price of a condominium apartment in the GTA increased by 8.2 per cent monthly in May from $578,283 to $625,445. If the resale condo market continues to show strength, many condo investors will sell their units instead of renting them at levels below their previous tenant. This will reduce the supply of rental units, which could stabilize rents in Toronto.
- When the Ontario eviction ban is lifted, another wave of supply could hit the market as landlords look to remove delinquent tenants, while others choose to leave voluntarily due to financial hardship. The economic consequences of the pandemic have hit tenants harder than owners, with employment losses in services, retail and manufacturing. As the economy opens up, many of those jobs will not come back, and those tenants will look for smaller, cheaper suites, creating upward rent pressure at the bottom of the rental market.
- On average, it is more expensive to lease a new studio, one-bedroom and three-bedroom condo than a new purpose-built rental apartment. But there is a much higher concentration of new condos in downtown Toronto, in comparison to purpose-built apartments. Secondly, in many of the purpose-built rental apartments, parking is charged separately, while many of the private condo landlords include parking (if one is available) in their asking rents.
- A tenant will have to pay about $1.37 more for each additional square foot in Toronto on average. This is according to all of the condo and rental apartment listings on Torontorentals.com in May that had unit sizes available versus their asking rent.
- The influx of short-term rentals into the full-time rental market due to the lack of tourism resulting from the COVID-19 travel bans, has caused an unexpected surge in supply, especially in prime investor-heavy downtown condo projects.
- The pandemic health concerns, coupled with reduced employment and hiring activity, has resulted in less immigration and reduced in-migration into the GTA. These consequences of the pandemic have reduced rental demand at the same time as supply is increasing via short-term rentals and high-rise apartment completions.
This report takes a deeper dive into analyzing monthly, quarterly and annual rates and trends in the Toronto and the GTA rental markets.
Story by: Rentals.ca and Bullpen Research & Consulting