Urbanation, a leading resource for Greater Toronto Area condo and rental market intelligence, released its year-end 2018 rental market results at the end of last week.
In 2018, condo rent went up 9.3%, outdoing 2017’s increase of 8.3%. This is the highest rate of rent increase since Urbanation started reporting on the condo rental market in 2010. Year-over-year rent growth increased 6.4% in the fourth quarter of the year, which is the slowest pace of growth reported since the first quarter of 2017.
Urbanation says the moderation in rent growth was due to the average size of leased condo units decreasing to a record low of 709 square feet, and supply increasing with registered (completed) condos hitting a two-year high. In 2019, Urbanation expects more than 20,000 new condos to reach completion, and active listings at the end of last year hit a four-year high with 1,902 units.
“Recent housing policy changes, combined with strong demand fundamentals and supply constraints led to record growth for rents in the GTA last year,” says Shaun Hildebrand, President of Urbanation. “These factors should continue to keep upward pressure on rents, but to a lesser degree in 2019 as affordability becomes a bigger issue and more condominium and rental units finish construction.”
The average monthly rent in the fourth quarter of 2018 was $2,310. On a per square foot basis, the average rent increased 11.3% year-over-year to $3.26, which is a record high.
Total leases through the MLS hit a high of 27,426 in 2018, but when considering the total stock of condos in the GTA, lease activity fell to 8%, which is a five-year low. Urbanation lists a number of reasons for fewer condo leases relative the available inventory, including rent control, high prices, rising interest rates, and stricter mortgage qualifications. Of course, the slower turnover contributed to rising monthly rent.
Total leases increased 21% year-over-year in the fourth quarter of 2018, and Urbanation noted a significant spike in studio leases and small one-bedroom units (without dens). The number of studio leases increased 44% with an average monthly rent of $1,793. One-bedroom leases jumped 31%, averaging $2,024 a month.
There was also a big shift in rental activity to the edges of Toronto, in places like North York, Etobicoke, and Scarborough. The average rent in the more suburban areas of Toronto was $2,192 in the fourth quarter, while the average rent in downtown Toronto was $2,520.
With more supply becoming available, Urbanation believes rent growth in the GTA will slow this year. We recently chatted with Ben Myers, President of Bullpen Research & Consulting Inc., and he thinks rents in Toronto will increase by 11% this year, which would be huge. Whether rent goes up a lot or a little bit, it’s already high, making it difficult for first-time buyers to save for a down payment.