Urbanation, the leading source for Toronto condo market statistics, released its third quarter 2017 rental results, announcing that rents continue to soar as supply drops.
The number of Greater Toronto Area (GTA) rental transactions reported through the MLS increased by 10.3% to 7,761 compared to the same period last year. Average monthly rent went up to $2.99 per square foot to $2,219, which is a year-over-year increase of $232.
While rental activity was up overall, there was a decrease in activity with regards to smaller and less expensive units. One-bedroom rentals dropped by 11% and studio rentals fell 3%. But, both benchmark monthly rents increased by approximately $200 to $1,839 and $1,672, respectively.
If you’re looking to rent a two-bedroom in the GTA, the average rent is currently $2,498. A one-bedroom+den rents for just under $2,000. Unless you’re making really good money, dual income is necessary for a one-bedroom!
As of the end of September 2017, there were 1,048 active rental listings on the MLS, which is less than two weeks of supply. According to Urbanation, all signs are pointing to a drop in vacancy rates.
The low supply is also the cause of more rentals getting leased for more than asking. Around 42% of the time, the units are leasing for more than asking by at least $25. As supply drops, affordability will become more of an issue.
“The intense competition between renters in Toronto shows no signs of letting up in the near future,” says Shaun Hildebrand, Urbanation’s Senior Vice President. “While it’s encouraging to see that rental proposals are still coming in, the level of new development needs to ramp up significantly in order to meet demand.”
The demand is so strong for rentals that the average time it takes to get leased hit a record of 10 days. People barely have time to think or revisit the unit before someone else submits an offer over asking.
The rental market has tightened due to a number of factors: a surge in migration, a decline in ownership demand, a rapid increase in housing prices earlier this year, two interest rate increases, tougher mortgage insurance qualification criteria, and rent control lowered tenant turnover rate.
Basically, the rental market tightens when less people decide to buy homes.
One thing to keep in mind is that location is a significant factor. Like with housing prices, the further from downtown you go, the lower the rent will be (depending on the neighbourhood). But then other expenses come into play, like car ownership or transit passes.
There have been signs that people are once again gaining more confidence in the resale and new home market. In order to have a balanced rental market, the resale and new home market must be close to balanced, too.