Condo rents climb to record average of $2,806 in Toronto
The cost of renting a condo in Toronto hit a record average of $2,806 in August, a 19.5% year-over-year increase, or $458 per month.
This is the 10th month in a row that condominium rents have risen in double digits year-over-year, rising 11.4% in the last three months alone, according to an update this week from the company. Urbanation market research.
Condo rents have been above pre-pandemic levels since the spring, company president Shaun Hildebrand said this week.
“It’s not a rebound effect (from the pandemic). It’s actually the growth, which makes it all the more alarming that rents are going up in a short period of time,” he said.
He attributed part of the rise in rents to rising interest rates that have slowed home buying even as the Toronto area sees high employment rates. The Bank of Canada raised its key rate by another 75 points to 3.25% on Wednesday. This rate was 0.25% at the start of the year.
“We now have higher income tenants active in the market who otherwise would have bought if the terms were right for them, if the affordability was better. They are able to pay higher rent levels and that is contributing to the exceptionally strong growth we are seeing,” said Hildebrand.
Urbanation found that 41% of renters who rented a condo in August agreed to pay more than the asking price, an average of $132 more per month. The average length of stay for condos in the rental market also fell to a record low of eight days last month.
The behavior is similar to what the rental market experienced from around 2016 to 2018; then rental growth began to slow in 2019.
“I think we’ll eventually see that too,” Hildebrand said. “The market is naturally starting to hit some resistance levels because (it) is just getting too expensive.”
At this point, tenants begin to find roommates or move into older, more affordable buildings and demand begins to slow, he said.
“We could have started to see the first signs of this in the August data. Rental transactions actually declined month-over-month and year-over-year, even though new listings were higher,” Hildebrand said. “That obviously doesn’t lead to lower rents yet. But if it continues, we could see rents start to stabilize.
Some easing of rents could also come from a better balance between market supply and demand; there are 30 percent more listings on the market than a year ago, but still less than a month’s supply.
The number of leases signed in August was 6% lower than in July, the month when students sign the most leases starting September 1.
There were 155,568 condos on Toronto’s rental market in October 2021 (the most recent numbers available), according to the Canada Mortgage and Housing Corporation. That compares to 320,152 purpose-built rentals — townhouses or buildings with three or more units.
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