While average rents for all GTA rental units available for lease in Q1-2023 reached record highs, smaller units saw a significant surge, according to new data from Urbanation.
In terms of purpose-built rental buildings, average rents reached highs of $3,002. Annual rent growth for purpose-built rentals in Q1-2023 was 13.8 per cent based on units that turned over in Q1-2023 compared to Q1-2022. This represented a slower rate of annual rent increase than recorded in Q4-2022 at 15.1 per cent.
Within the condominium market, average transacted rents reached $2,741 in Q1-2023, with similar annual growth as purpose-built rentals at 13.6 per cent. In the three-year period since Q1-2020, average condominium rents increased by a total of 15 per cent, which accounts for rent declines that occurred during the first year of the pandemic.
Rents for studio and one-bedroom condo rentals averaged $2,124 and $2,484, while two-bedroom rents averaged $3,125.
“The GTA rental market remained substantially undersupplied during the first quarter of 2023,” said Shaun Hildebrand, President of Urbanation. “Even though supply is set to increase in the near-term, it is expected to be short-lived and insufficient to offset demand. The fact that rental construction has dropped by over 60 per cent in the last year despite rents having risen to over $3,000 is indicative of the economic challenges developers are facing.”
Renters in the condominium market shifted towards smaller units that have lower monthly costs. As a result, units under 500 square feet saw rents rise by 21 per cent compared to a year ago, while studios and one-bedrooms-without-dens increased by 17.8 per cent and 17.1 per cent respectively. The only category offering rents under $2,000 per month was micro units (i.e., units less than 350 square feet).
Vacancy Rate Under 2% for fifth straight quarter
The vacancy rate in purpose-built rental buildings completed in the GTA since 2005 was 1.8 per cent in Q1-2023, edging up slightly from a year ago in Q1-2022 (1.6 per cent) but remaining below 2 per cent for the fifth consecutive quarter. The GTA rental market has tightened due to record high population inflows, low homeownership affordability, and a strong labour market all contributing to an increase in demand while supply has remained low. In Q1-2023, a total of 724 new purpose-built rentals reached occupancy, falling below the quarterly average of 794 completions over the past two years.
Rental completions set to rise
According to projected occupancy dates, purpose-built rental completions will increase significantly during the remainder of the year, raising the 2023 total to 7,520 units — a 174 per cent increase over 2022 (2,747 completions) and a 297 per cent increase over the latest 10-year average (1,893 completions). That said, the increase in supply is expected to be temporary, as construction starts totaling 2,997 units over the last four quarters represented a 62 per cent decline over the four-quarter total of 7,863 starts in the period ending Q1-2022.
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