According to Urbanation’s Q3 rental market report, purpose-built rental construction in the GTA has stalled as demand for rental apartments continues to surge.

A hot GTA rental market boiled over during the summer months as students flocked back to the city and homebuying activity plunged amid further interest rate increases. While third quarter condominium lease activity was down 11 per cent annually to 12,447 transactions from a record high in 2021, this was a function of supply rather than demand. Active listings at quarter-end fell 20 per cent year-over-year to 2,311 units — 6 per cent below the 10-year average.

In fact, the rental market became so unbalanced during the third quarter that units were on the market for a record low average of 10 days. Furthermore, a record high 36 per cent share of condo rentals leased for above asking in Q2. These units also rented for a record high premium as the average amount paid over asking rent reached $129 per month.

This led to an 8.1 per cent quarter-over-quarter increase in average condo rents to a record high $2,733 ($3.86 per sf), bringing average rents up 14.5 per cent over the past six months, up 16.6 per cent over the past year, and 11.9 per cent higher than the pre-pandemic high in Q3-2019.

“It’s clear that rental demand and new construction are moving in very different directions, which is going to continue placing strong upward pressure on rents over the long term,” said Shaun Hildebrand, president of Urbanation. “While a more moderate pace of rent increases may be in store in the coming months as the economy slows, record high levels of immigration and low ownership affordability should keep the rental market undersupplied.”

Consistent with recent quarters, the strongest annual rent increases were recorded for the smallest unit types. Studio rents increased 21 per cent annually to an average of $2,123 ($5.18 psf) and one-bedroom rents increased 19 per cent annually to $2,463 ($4.07 psf). This compares to 15 per cent annual growth in average two-bedroom rents to $3,122 ($3.61 psf) and 12 per cent annual growth in average three-bedroom-plus rents to $3,955 ($3.41 psf).

The average vacancy rate in purpose-built rental projects completed in the GTA since 2005 dropped to 1.2 per cent in Q3-2022 from 3.2 per cent a year ago in Q3-2021 and the pandemic high of 6.4 per cent reached in Q1-2021, effectively returning to pre-pandemic lows.

Rental development activity stalled for the second consecutive quarter as only one project (227 units) started construction in Q3-2022. Total year-to-date starts fell to 1,709 units, a 72 per cent plunge from the same period in 2021. This caused the inventory of total rentals under construction in the GTA to decline to 19,011 units in Q3-2022 from a recent high of 20,215 units in Q1-2022, a by-product of the sharp increases in interest rates, construction costs and development charges that developers are experiencing.

 For more on this report, visit: Urbanation |