Toronto has had a sky full of cranes for over a decade, and with the odd exception, they’re all building a new condo. Toronto has gone through a condo boom of mass proportions, and there’s no stop in sight. While there are close to one-and-a-half million people living in condos in the GTA, with numbers steadily on the rise, not all of them are owners. The condo rental industry has been growing immensely over the last few years.
According to Jeanhy Shim, president of Housing Lab Toronto and commenting on the 2014 Urbanation report, there were somewhere around 1,000 condos in 1971 – less than two per cent of all dwellings in the GTA. In 2014 Shim put that figure at about two million units, about 28 per cent of GTA dwellings. in 2008 Shim noted almost 43,000 of those units were rentals. By 2013 she said the number of units had nearly doubled to 77,255 rental suites.
The growth of the city, the lack of purpose-built rental developments in the past 20 years and the steep rise in housing prices have greatly contributed to the growth of the condo rental market. Purpose-built apartment supply is low – and a supply of fresh, modern options is largely lacking as most purpose-built rentals are older building. Only a handful have been overhauled completely to modern style and standards.
It has only been in the past couple of years, as market rent has sharply risen, that some developers have switched from focusing on condo development and moved over to purpose-built rental. Though they’re lucrative options for developers, these have not been coming to market at a fast enough pace to support urban growth and demand. The Canadian Mortgage and Housing Corporation (CMHC) found the rental vacancy at only one per cent in Toronto in October, 2016, which had dropped from 1.8 per cent only a year earlier. Meanwhile the number of rental condos grew by 13 per cent in the same period.
Investor-owned rental condos seemed like the perfect way to fill the gap between supply and demand in a tight rental market. The purpose-built rental industry and the condo rental industry seemed to both keep bustling.
So why are we seeing a decline in availability in condo rentals, even as market rent is on the rise and investor interest is still strong in the real estate market?
Market rents have gone up sharply in the GTA. As housing prices continue their rampant upward trajectory, urbanites have to make some tough decisions:
- Leave the city in search of affordability
- Buy something smaller to accommodate the budget of an average income
- Find an alternate/creative way into the real estate market
- Rent in the city.
But the lack of rental products is continuing to drive up the market price of rent.
According to Urbanation, condo rents rose 11.7 per cent in the fourth quarter of 2016, with the average rent closing in on $2,000 per month. Condos in Toronto’s core were up even more, at 12 per cent, with rents hitting $2,134 on average. Home prices went up over 17 per cent, while condos increased at 15 per cent in the same period. Yet, the number of rental condos available was down eight per cent, notes Urbanation. With both rent and real estate prices at such a peak, it’s a combination of reasons that inventory is growing tighter. Investors are selling. Renters are holding on where they are, hoping to avoid a surge price when moving from one rental to another. the population is growing and the demand for rental is keeping vacancy holding at near-record lows, putting supply and demand to the test. The less product that’s available, the higher the market value of rent goes.