Renters in the market for condo units across the Greater Toronto Area continue to face challenges stemming from a supply shortage, but there is recent evidence of some relief in sight, a new report suggests.
While condo rents in the GTA continued to climb annually in the first quarter of this year, they “held steady” compared to the previous quarter as the more than 11,000 condos completed in the past half year reduced some of the pressure, according to Urbanation.
The GTA’s condo market has over the years become a secondary rental market. As many as half the units in a newly completed condo development may be rented out, according to Urbanation.
On average, rents for condo units leased out on the Toronto Real Estate Board (TREB)’s multiple listing service system rose 8.3 per cent compared to the same period last year. That set the average rent from last quarter at $2.75 per square foot, or $1,993.
The real estate consultancy says in 2016’s fourth quarter, rents had surged by a frothier 11.6 per cent on a year-over-year basis.
Condo units in the pre-amalgamation City of Toronto (so, excluding North York, Etobicoke, Scarborough) commanded the highest rents in the GTA at an average of $2,155, or $3.08 per square foot.
Scarborough, where rents averaged $1,640, or $2.13 per square foot, was most affordable.
The entire 905 region, which includes Mississauga, Markham, Vaughan and Richmond Hill, had an average condo rent of $1,740, or $2.24 per square foot.
In another sign of stabilization, GTA condo units that were listed for rent last quarter stayed on the market for an average of 20 days, compared to just 13 days in the final quarter of 2016.
Meantime, landlords were able to get rents above asking on 9 per cent of the units leased out, down from 17 per cent in the preceding three-month period.
“Although the rental market remained undersupplied in the first quarter, market forces worked together to temper rent increases,” writes Hildebrand in a statement.
“A return to previous highs for condo deliveries and a rise in purpose-built rental completions are expected to keep a lid on rent growth over the next few years,” he explains.
The number of proposed purpose-built rental units reached 29,360, having risen from the 27,812 total of the fourth quarter in 2016, although the number of units being built declined. Last quarter, contractors were working on projects totalling 5,290 units, a drop of 8 per cent from one year prior.
The average rent in a purpose-built building in the GTA climbed by 5.6 per cent last quarter coming in at $2.52 per square foot.
The short-term outlook may have provided some encouraging signs for renters, but there are concerning signals for renters looking further ahead, Hildebrand suggests.
“Without more meaningful growth in purpose-built rental construction, even greater supply shortages will likely emerge in the post-2019 period,” Hildebrand adds.