The Toronto Real Estate Board released its quarterly rental market results, reporting tight conditions across the Greater Toronto Area as average rents remain unaffordable.
In the fourth quarter of 2018, the average rent for a one-bedroom condo apartment in the GTA was $2,143, which is a year-over-year increase of 8.8%. The average rent of a two-bedroom condo unit increased 5.5% to $2,774.
"The Greater Toronto Area has seen significant growth in its economy throughout 2018,” says TREB President Garry Bhaura. “It has become a primary destination for companies in various industries who are attracting younger talent who have a desire to live in the region. This desirability has contributed to the continuation of historically-low vacancy rates, strong competition between renters for available units and, as a result, very strong growth in average rents.”
The odd thing is that condo townhomes are actually more affordable than the condo apartments. There were 54 one-bedroom townhome leases in the final quarter of last year with average rent coming in at $1,933. It seems like more people are realizing they can get a townhome for a similar price because leases increased 22.7% year-over year.
The same goes for a two-bedroom and three-bedroom condo townhome rental, averaging $2,254 and $2,506, respectively. The average rent of a three-bedroom condo apartment was $3,366 in the fourth quarter of 2018.
The number of people leasing larger condo apartments is dropping. There were 2,044 two-bedroom leases, which is 0.3% lower than the same period last year, and there were just 127 three-bedroom condo apartment leases, a drop of 15.3%. The majority of condo apartment leases were one-bedrooms, totalling 3,675 for the quarter, which is a 12.7% year-over-year increase.
As rents continue to climb, studio apartment rentals have also increased, jumping 5% with 211 leases and rent increased 9% to $1,821. Clearly, people are being forced into smaller units due to price.
"It will be important to continue monitoring the supply of rental condominium apartments,” says Jason Mercer, TREB's Director of Market Analysis. “While TREB certainly supports the recent rent control exemptions announced by the provincial government, this change does not benefit all investor-owners of condominium apartments, who have provided much of the new rental stock over the past decade. It is conceivable that rent controls could prompt some investors to consider selling their units and investing the proceeds in another asset class. This scenario could obviously compound an already problematic rental supply issue in the GTA.”
There is a glimmer of hope though - listings outstripped rental transaction growth, increasing 16.6% for a total of 10,690. With more supply hitting the market, we could see rents dropping. TREB points out that listings will have to outpace leases for a few quarters before balance is restored to the market.