According to Q2 2022 rental market research from Urbanation, GTA rents rose at their fastest pace on record, with smaller units experiencing the strongest growth rates since the pandemic. This, it says, is due to a reacceleration in population growth, near record-low unemployment, and a sharp reduction in home purchasing power as interest rates increased.
For the fifth consecutive quarter, rental demand outstripped growth in supply, causing market conditions to tighten significantly. Condo lease transaction activity in the second quarter remained close to the record high reached last year at 12,048 units, down by 6 per cent, while the total volume of condo rental listings in Q2 declined 21 per cent.
Condo rental inventory dropped to a record low 0.3 months of supply and the quarterly ratio of leases-to-listings rose to a record-high 90 per cent. This led average per-square-foot condo rents to rise 5.9 per cent quarter-over-quarter to a new high of $3.57 ($2,533), with annual rent growth reaching a record pace of 16.7 per cent.
As the GTA rental market fully recovered from the effects of COVID-19 and rents reached new highs, the smallest and least expensive unit types experienced the strongest growth rates. Rents fell the most during the first year of the pandemic as renters moved out of small spaces in the core, causing them to drop by as much as 24 per cent. However, when comparing rents in Q2-2022 to those three years earlier, studios are still down by 1.0 per cent.
Meanwhile, vacancy rates fell to 1.4 per cent as rental demand flowed back into the core. Less than one quarter (24%) of new purpose-built rental projects completed in the GTA since 2005 offered incentives in Q2 2022—a sharp decline from the 45 per cent last quarter and the 88 per cent share for a year ago.
Still, as rental demand heated up, new construction almost completely stopped in the second quarter with a low of only 87 rental starts, down from an average of 1,916 starts during the preceding four-quarter period. This occurred while 1,263 new rental units began occupancy, resulting in the largest quarterly decline in total rental inventory under construction since Urbanation began tracking the data in 2015. However, at 18,976 units, the number of rentals under construction remained near a multi-decade high. Furthermore, long-term interest in purpose-built rental development continued to grow as the inventory of proposed rentals that have not yet started construction grew to over 103,192 units in Q2, up from 88,258 units a year ago.
“The GTA rental market was as strong as ever heading into the peak summer months, which is sure to place further downward pressure vacancies and upward pressure on rents,” said Shaun Hildebrand, President of Urbanation. “Although the drop in construction during Q2 may be partly attributed to data volatility, it was also likely impacted by quickly rising construction and development costs, long delays in obtaining approvals, rising borrowing costs and tighter lending conditions. With housing affordability at generational lows and continuing to deteriorate, it’s concerning to see rental demand and supply deviate so strongly.”
For more, visit GTA RENTS REACH NEW HIGH IN Q2 AS VACANCY RATE FALLS | Urbanation
