Condo completions to have a ‘calming effect on rent increases next year’

Urbanation, the leading source for condo and rental market intelligence in the Greater Toronto Area, released its third quarter 2018 rental market results, reporting a dire need for more supply.

One thing that immediately stood out to us was that the amount of units leased for less than $1,800 a month fell by 65% compared to the third quarter of 2017, all while leases of units with rent higher than $2,500 surged by 43%.

With monthly rents on the rise, studios are in demand with a 32% jump in leases, but the average rent of a studio in the GTA increased 9% to $1,823. If you’re looking for a one-bedroom without a den, the average price increased 11% to $2,056. This is maybe manageable if you’re lucky enough to have a significant other to split the rent.

If you don’t have a partner, maybe a roommate will do. The average two-bedroom costs $2,810 a month, which is a 9% year-over-year jump. It looks like this is too expensive for many tenants because leases fell 5% compared to Q3-2017.

Overall in Q3-2018, rent jumped 9.4% year-over-year to $3.26 per square foot. The average monthly rent increased 7.6% to $2,385. The average unit size dropped from 744 to 731 square feet.  

There were 8,186 condo leases in Q3-2018, which is a 5% increase and a three-year high. Units were on the market for an average of 11 days, which is only one day longer than the same period last year.

“Rapid rent growth has persisted in the GTA for over two years now, making it very clear that much higher levels of supply are needed to create a balanced market environment,” says Shaun Hildebrand, President of Urbanation. “While increasing condo completions should begin to have at least some calming effect on rent increases next year, more upward momentum in purpose-rental construction is required to meet overall demand.”

Rent growth is expected to slow next year with a record 28,163 units expected to be completed, including 4,419 purpose-built rental. Also, proposed purpose-built rental hit a high of 39,750 units across 128 projects.

While there are many purpose-built rental units proposed, construction slowed in Q3-2018 down to 826 starts, which is a two-year low and much lower than the 2,635 starts in the previous quarter. Total inventory of purpose-built rental under construction hit 11,172, which is the highest it’s been in more than 30 years and 56% higher year-over-year.  

Here’s hoping that Urbanation is correct and rent growth take a breather as new units hit the rental market in 2019.