The rental market in the Greater Toronto Area (GTA) continues to surge as average rents for purpose-built rental buildings completed since 2005 reached a new high of $3,002 in Q1-2023, according to a new report by Urbanation.
The annual rent growth for purpose-built rentals in Q1-2023 slowed at 13.8%, compared with the 15.1% recorded in Q4-2022. The average transacted rents for condominiums reached $2,741 in Q1-2023, with similar annual growth rates as purpose-built rentals at 13.6%.
The data highlights that renters in the condominium market are opting for smaller units due to the increasingly expensive market, which has resulted in the fastest rates of rent growth for studio and one-bedroom-without-dens units in Q1-2023, with annual rent increases of 17.8% and 17.1%, respectively. Units under 500 square feet saw a 21.0% increase in rents from a year ago. Two-bedroom units remain the most expensive, averaging $3,125 in rent.
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The vacancy rate in purpose-built rental buildings completed in the GTA since 2005 was 1.8% in Q1-2023, slightly up from Q1-2022’s rate of 1.6% but remaining below 2% for the fifth consecutive quarter. The report attributes the tight rental market to record high population inflows, low homeownership affordability, and a robust labor market, contributing to increased demand while supply remains low.
According to the report, rental completions are projected to increase significantly during the remainder of the year, with 7,520 units expected to be completed in 2023, a 174% increase over 2022. But the increase in supply is expected to be temporary, as construction starts have declined by 62% over the past year.
The report suggests that the rental market in the GTA is likely to remain tight for the foreseeable future. This trend could cause affordability challenges for renters, who may need to adjust their housing preferences or seek out less expensive rental options outside the GTA.
A separate report by Rentals.ca found that asking rents increased by 1% monthly and 10.8% year on year, reaching an average of $2,004 in March for all available property types across the country. Average asking rents grew by $196 in the past year, showing that demand for rentals is clearly and strongly outpacing supply.
Information for this story was found via Urbanation, Rentals.ca, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
