According to newly released data from Urbanation Inc., a dramatic increase in housing starts and completions in the Greater Toronto and Hamilton Area (GTHA) over the past 12 months have led to higher vacancies. Record-high condo completions drove down condo rents by 7.4 per cent in Q1-2024 compared to Q3-2023, with average condo rents now coming in at $2,732 (or $3.89 per square foot). Meanwhile, purpose-built rental vacancy rates also edged up by 2.6 per cent, with rental construction starts over the past year soaring 174 per cent compared to 2022 lows.
“While the market remains expensive with rents 15 per cent higher than two years ago, renters waiting for some reprieve in the market have found it thanks to a temporary supply infusion from condo investors,” said Shaun Hildebrand, President of Urbanation. “This isn’t expected to last long, and rents should continue rising as construction falls short of demand.”
Despite this decline, average condo rents in the GTHA increased 1.6 per cent year-over-year to $3.89 per square foot ($2,732 for 702 sf). Outside of the rent declines experienced during COVID-19, this represents the slowest annual pace of rent growth in nine years and a substantial deceleration compared to the 13.3 per cent annual increase recorded a year ago in Q1-2023.
As per Urbanation’s data, supply from newly completed condos made a significant impact on the rental market. Over the past four quarters, a total of 23,095 new condos were registered — a 21 per cent increase over the same period ending Q1-2023 (19,028) and the third highest four-quarter total ever recorded. Additionally, a record high 12,132 new condo units began occupancy in Q1 alone, adding further ‘shadow’ rental supply to the market.
Condo rental listings
Buildings registered in the past four quarters represented a record 24 per cent share of all condos listed for rent in Q1-2024. Overall, the 37 per cent year-over-year increase in condo rental listings more than doubled the 15 per cent increase in leases signed during Q1-2024. This pushed active condo rental listings at quarter-end up to 5,078 units — a 55 per cent quarter-over-quarter increase and more than double the level from Q1-2023 (2,516).
Purpose-built data
For purpose-built rental buildings completed since 2003, rents increased 2 per cent quarter-over-quarter and 4.5 per cent year-over-year to an average of $4.14 psf ($2,933 for 723 sf). The continued growth in rents for purpose-built rentals came as new supply slowed. After reaching a multi-decade high of 5,779 units for the year ending 2023, purpose-built rental completions in Q1-2024 fell to a six-quarter low of 783 units.
The 2.6 per cent vacancy rate for purpose-built rentals in Q1-2024 represented a slight increase from Q4-2023 (2.5%) and a modest increase compared to a year ago in Q1-2023 (2.0%), but still representative of an undersupplied market. Vacancy rates were highest in non-rent controlled buildings completed since 2019 at an average of 3.5 per cent, compared to pre-2019 rent-controlled buildings averaging vacancy of only 1.7 per cent.
Improved construction activity
Since the government announced the removal of GST on new purpose-built rentals in November 2023, progress has been made towards improving construction activity. Over the last four quarters, a total of 5,976 purpose-built rental units started construction, a 174 per cent increase off the low of 2,182 starts in the four-quarter period ending Q3-2022. However, the latest annual total for starts remained below the recent high of 7,540 starts recorded in 2021, and starts were down 21 per cent year-over-year in Q1-2024 to 1,329 units. The total inventory of purpose-built rentals under construction in the GTHA reached a multi-decade high of 22,064 units in Q1-2024.
Click here for more GTHA Q1-2024 data from Urbanation
