The Greater Toronto Area set a new record in 2013 after hitting $1.48 billion in transaction volume for multi-family properties, according to a newsletter from Colliers International. This represents a 60 per cent increase over the previous 10-year average.
When compared with 2012, 2013 saw fewer suites trade hands (10,831 and 9,950, respectively). However, appreciating property and suite values resulted in a nine per cent increase in total transaction dollars.
Colliers attributes a sustained level of sales throughout 2013 to a trend in capitalization rate compression over the past several years, driven by increased interest in multi-family assets and bargain lending rates.
Vacancy rates throughout 2013 remained relatively unchanged year-over-year, at 1.7 per cent. Rental rates for 2013 increased by 3.1 per cent.
The report suggests that these stable conditions can be accredited to several supply and demand factors, including:
- Fewer renters choosing to move into ownership territory, mainly due to lack of affordability
- Strong youth employment opportunities
While rental rates have increased, the report states that the “cost of ownership still substantially exceeds the cost of renting, keeping baby boomers and younger generations from making the move to ownership.”
Looking forward, Colliers sees potential for the purpose-built rental market in the GTA. Opportunities for savings created by purpose-built rental housing include lower quality finishes, less amenity space, preferential financing and reduction of marketing and sales costs. These, combined with favourable market conditions, make the purpose-built rental sector a financially viable option for developers, it states.
