Toronto condo rental prices soar, key vacancy rate drops as pandemic recovery picks up speed

Toronto area tenants are once again facing a squeezed rental market similar to what they experienced before the pandemic, according to two reports released on Tuesday.

Market research firm Urbanation says the vacancy rate for newer purpose-built apartments slid below two per cent while condo rental prices soared 15.8 per cent annually in the first quarter of this year.

That rent growth, in addition to a 3.1 per cent quarter-over-quarter increase, was the fastest climb in condo rents that Urbanation has seen since it began tracking lease rates in 2010, it said Tuesday.

After stalling during the pandemic, the rental sector is poised for growth with skyrocketing home ownership costs, rising immigration and interest rates fueling the demand for apartments, said Urbanation president Shaun Hildebrand. Those are in addition to climbing inflation and near-record low unemployment — factors that typically drive down vacancies and boost rents.

“Unfortunately, even with the big rise in (apartment and condo) completions that we’re projecting this year, it looks like affordability for renters is likely to get worse,” he said.

“Condo rents usually rise very minimally, if at all, between the fourth quarter and the first quarter,” said Hildebrand.

“But with the recovery gaining momentum; more pandemic-related restrictions being lifted; population flowing back into the city and, obviously, housing prices skyrocketing in the first part of the year, I think rents received a bigger than normal boost in the first months of 2022,” he said.

Urbanation’s first-quarter report showed that GTA condo rents are at the highest level since the fourth quarter of 2019. A 710 sq. ft. unit is demanding an average rent of $2,396.

Rising rents in the region were led by the City of Toronto in the last year, which saw a 16.8 per cent annual increase. But the cost of those units still remains 0.9 per cent below where they were two years ago. In the same two-year period rents in the 905-area communities have risen 7.7 per cent.

Soaring demand has also goosed rent prices 4.1 per cent year over year in the first quarter in purpose-built apartments constructed since 2005. That does not include newly completed units that tend to demand higher rent.

Where 70 per cent of those apartment buildings were offering incentives such as rent discounts a year ago, only 45 per cent were using such enticements by the first quarter of this year.

Another report, from Rentals.ca, also shows Toronto’s rental market returning to pre-pandemic conditions, with rents jumping 11 per cent annually for a one-bedroom apartment in March and 16.2 per cent for a two-bedroom unit, although there was a one per cent dip in prices compared to February.

Countrywide, rents rose 6.6 per cent, according to the National Rent Report, which is based on the listings posted on the website. Toronto, which saw a rise of 14.3 per cent year over year in March to $2,326 for all property types, was second only to Vancouver in Canadian prices. In Vancouver rents were up nearly 30 per cent to almost $3,000 a month.

Urbanation reported that there were 118,203 purpose-built apartments under construction or in the planning stages in the first quarter of this year. There were 25 per cent more under construction than a year ago but only 7,684 are expected to be complete in 2022.

Although that is more than double the 3,461 that were completed last year, only a small share of the total projects have been approved, said Hildebrand. As governments look at ways to increase the housing supply, they need to pay particular attention to rentals, he said.

“They take a long time to go through the planning process and, really, let’s find a way to get these units built, because that will eventually — hopefully — bring us into a more balanced market where we don’t have to see such aggressive rises in rent.”

A three to four per cent vacancy rate is considered a balanced market, said Hildebrand.

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