The Greater Toronto Area’s rental market is struggling with a lack of supply and increasing rent. Looking ahead to 2020, it looks like the affordability struggles will continue.
The latest report from Rentals.ca and Bullpen Research & Consulting points out that the GTA had strong pre-construction condo sales in 2016, and based off the typical four-year lag, there should be many completions in 2020. In theory, this means there will be a lot of supply hitting the market, but the report also warns that “elevated population growth, and a recovering resale housing market will continue to price-out first-time buyers and should offset some of that increases condo rental supply.”
Based on Rentals.ca listings, the average rent in Toronto in November 2018 was $2,385. In November 2019, the average rent in Toronto was $2,591. Rentals.ca and Bullpen estimated December 2019 rent to average $2,600. A year later, the average rent will be $2,770 in December 2020, which would be a 7% increase.
Recent Urbanation data suggested that rent may have peaked around $2,500 in the GTA as rent growth slowed and vacancy rates stayed around the same level. Looks like Rentals.ca and Bullpen don’t foresee the same thing.
Another thing to consider is that the City of Toronto is introducing new short-term rental regulations, which will make it illegal to offer short-term rentals in secondary residences. That means short-term rentals will only be allowed in primary residences. This could result in some condo supply hitting the long-term rental market and resale market as investors pull their units out of the short-term rental market.
Condo rent growth in Toronto was actually more moderate than expected in 2019, increasing just 4%, whereas purpose-built rent increased a whopping 9%. The average rent for a single-family home in Toronto soared by 11%.
It’s become clear that tenants want a bit more space, and they are willing to take on roommates to get it. In Toronto, the average rent for a one-bedroom unit fell 0.3% to $2,314, while the average rent of a two-bedroom unit went up more than 1% to $2,966. Splitting a two-bedroom not only gets you more space, but it is more affordable than renting a one-bedroom on your own.
Landlords are catching on though; two-bedroom units in Canada had the greatest rent growth, increasing 17% year-over-year ($2,021). The average rent of a one-bedroom unit ($1,692) and five-bedroom house ($3,275) increased 11%, tied for second strongest rent growth.
Toronto’s rental market was too expensive for many households this year, and it doesn’t look like there will be any relief in 2020.