The number of condominium apartments leased in the Greater Toronto Area (GTA) through the MLS system fell two per cent in 2016 to 26,602 units, according to Urbanation’s year-end 2016 rental results. This is the first annual decline recorded by the company since 2011. Rental activity slowed in 2016 due to occupancy delays for condos under construction, less rental turnover of the existing stock, and a rise in resale activity. Meanwhile, applications for new purpose-built rental developments rose to 27,812 units, which is nearly three times the 10,513 units proposed one year ago.
Despite a 34 per cent increase year-over-year in final closings for newly completed condos in the fourth quarter of 2016, total rental listings fell by eight per cent, causing lease volumes to drop four per cent annually. As resale prices for condos climbed 15 per cent over the same period, more owners have decided to sell their units instead of renting them out. At the same time, existing tenants have become less willing to move due to the high cost of renting an apartment in the open market. The share of the total inventory of condos leased last year fell to 8.5 per cent from 9.3 per cent in 2015, while the share of total units resold increased from 7.1 per cent to 8.1 per cent.
The average rent of condo apartments climbed 11.7 per cent year-over-year in the fourth quarter, the highest level of growth ever recorded by Urbanation and especially notable when compared to the 4.2 per cent rate of increase recorded one year ago. This acceleration is partially due to a shift in lease activity to the former City of Toronto and relatively high rents in newly completed buildings. However, same sample rents grew by 7.3 per cent, as the average number of days on the market fell to 13, down one full week compared to the fourth quarter of 2015.
“The undersupply of rentals in the GTA continued to worsen throughout the year, causing rents to surge alongside home prices and further deteriorating housing affordability across the region,” said Shaun Hildebrand, Urbanation’s senior vice president, in a press release. “While less pressure on rent growth may arrive in 2017 due to a temporary rise in new apartment completions, it’s become clear that more attention needs to be paid to building rentals over the longer-term.”
In condo rentals, the average rent reached a record $2.77 per square foot in Q4-2016, based on an average unit size of 719 square feet, causing the average monthly rent to climb to $1,990. In the former City of Toronto, rents averaged $2,134, or $3.13 per square foot, while the suburbs of Etobicoke, North York and Scarborough averaged $1,857, or $2.47 per square foot. In the 905 region, rents were lower at an average $1,739, or $2.22 per square foot. Rents showed the largest increase in the former City of Toronto at 12 per cent, compared to seven per cent in the Toronto suburbs and six per cent in the 905 region.
In Urbanation’s survey of purpose-built rental apartment projects completed across the GTA since 2005 (49 buildings featuring a total of 8,484 units), a vacancy rate of 0.6 per cent was reported, down from one per cent last year. The availability rate (vacant units plus those where the tenant has given notice) was 1.6 per cent, the lowest level recorded by Urbanation over the past two years. Rents were an average of $2.49 per square foot, an increase of five per cent year-over-year. The inventory of purpose-built projects under construction was 22 buildings and 5,133 units in the fourth quarter of 2016, down 1,037 units year-over-year.
