Urbanation, the Greater Toronto Area’s (GTA) leading source for condo market intelligence, recently released its 2017 fourth quarter rental market report, announcing that supply is not meeting the strong demand.
There were 27,219 condo rentals leased through the MLS system in 2017, which is 1% higher than 2016. But as a share of total condo units in the GTA, the share of leases fell 8.3%, the lowest level since 2013.
While the total for 2017 showed an increase, there was an 11% drop in leases in the fourth quarter and listings dropped 16%. According to Urbanation, some investors took advantage of the rising prices and sold, which could lower the rental supply if sold to end-users. When it comes to new project completions, 2017 finished at a four-year low of 15,827 units.
The average monthly rent increased by 9.1% in the fourth quarter, hitting $2,166. The per square foot average went up by 5.8% to $2.93. This price growth was slowed by more tenants looking to the 905 region for more affordable rent.
In downtown Toronto, the average monthly rent increased 12.4% to $2,392 ($3.37 per square foot); this is what caused more people to seek out rentals in the 905. Leases in the 905 increased 26% for the fourth quarter, which caused average rent to jump 8% to $1,867 ($2.45 per square foot).
The high rent and tighter rent control are preventing tenants from moving as much, which is also tying up supply. The average time between same unit leases was 22.8 months in the fourth quarter. Compare that to 19.7 months in the fourth quarter of 2016 and 16.4 months in the fourth quarter of 2015.
“Persistently strong rent growth throughout 2017 was simply the result of demand fundamentals for renting far outweighing supply,” says Shaun Hildebrand, Urbanation’s Senior Vice President. “This has raised the confidence of developers to add more units to the pipeline, a trend that will need to continue in order to meet future housing needs for the GTA.”
If construction moves along smoothly in 2018, we could see some rental units supporting the strong demand since 2017 finished with 7,184 units under construction, the highest level in 25 years. In the fourth quarter alone, 1,198 units began construction.
It will be interesting to see if the new mortgage rules and rent control affect the activity of condo investors in the GTA. Do you think there will be fewer new condo sales this year?