Toronto End-of-Year Rental Report: Demand on the Rise
When it comes to rental availability in the Greater Toronto Area, would-be tenants continue to be challenged by a growing supply-and-demand gap. The Canada Mortgage and Housing Corporation (CMHC) recently reported that while increased rental supply from newly completed purpose-built rental buildings has somewhat eased pressures in the GTA rental market, relentless demand from millennials and immigrants continue to drive up prices.
The overall vacancy rate increased to 1.5% from 1.2% while the average rent rose by 6.8% to $1,452 in the region in 2019. The condo vacancy rate (a third of all condos in Toronto are rented out) is at just 0.8%.
“It is encouraging to see more rental starts in the market. However, demand for rental still significantly outweighs the available supply,” says Dana Senagama, the principal market analyst at CMHC.
Demand for rental units is further compounded by the fact that tighter home ownership and mortgage lending rules are preventing people from buying — and causing them to stay put in their rental units.
For those who do buy, especially first-time buyers, they often choose to buy Toronto townhouses and condos for sale in Toronto. This has the effect of removing an important segment of rentals off the market, which tightens supply even further.
Another factor influencing supply is that renters aren’t moving once they find a place they like. The turnover rate decreased to 9.5% in 2019 from 11.2% in 2018, indicating that renters cannot afford to move – asking rents charged for vacant units are about 25% higher compared to that of occupied units in Toronto.
Favourable economic conditions in the city, such as low unemployment and higher average weekly earnings, have drawn many people to the area. Those aged 25-44, along with a massive cohort of international students, are the key drivers of the new entrants to the rental market
Developers have tried to keep up with the demand – total rental apartment starts jumped by 6% to 34,356 to June 2019 from June 2018, while condo units rose by 3% to 22,124 units. While it helps, it’s not nearly enough to reduce pressure on prices.
The average bachelor now rents for $1,138 in the GTA, the average one-bedroom for $1,356, the average two-bedroom at $1,547 and the average three-bedroom at $1,721, according to the report.
These rents are likely to rise in 2020 as long as the fundamentals – low interest rates, low unemployment, lots of immigrants and international students and slightly increased rental supply - remain solid.