A total of 27,219 condominium apartments were leased through the MLS System in the Greater Toronto Area in 2017, up by one per cent compared to 2016 to reach a record high annual volume, according to Urbanation Inc.’s recently released Q4-2017 rental results. However, the number of units leased in Q4-2017 fell 11 per cent year-over-year as listings dropped 16 per cent.
Lower condo rental supply in 2017 was caused by an increased share of units resold as investors took advantage of quickly rising condo prices, as well as a fall in new project completions to a four-year low of 15,827 units registered in 2017. High rent levels and new rent control regulations are causing tenants to move less often, further reducing available supply. Urbanation found that the average length of time between same unit lease transactions was 22.8 months in the fourth quarter of 2017, climbing from 19.7 months in Q4-2016 and 16.4 in Q4-2015.
The continued tightening market conditions resulted in rents surging by as much as 12.4 per cent in Q4-2017 in downtown Toronto to an average of $2,392 ($3.37 per square foot). This led to a surge in rental activity in the less expensive suburban regions of the GTA, where the number of leases increased by 26 per cent year-over-year in Q4, while rents increased eight per cent to $1,867 ($2.45 per square foot). Overall, the average monthly rent for a condo in the GTA increased by 9.1 per cent year-over-year to $2,166. When calculating price increases by square footage, the average price to rent a condo apartment increased by 5.8 per cent to $2.93 per square foot, marking a slower rate of growth than previous quarters.
Of the 5,094 condo units leased through the MLS System in the fourth quarter, Urbanation found that 10 per cent of landlords were represented by companies instead of personal names. The share was unchanged from Q4-2016. This information is helpful to provide more information on condo ownership in Toronto, following a report from Statistics Canada stating that seven per cent of condominium units are owned by non-residents of Canada. As some non-resident owners may use corporations to purchase units, they may not be included in Statistics Canada’s estimates.
By the end of the year, there were 7,184 rental units under construction, the highest level in over 25 years. A total of 3,644 units began construction last year, including 1,198 units in Q4. After some cancellations and a pause in new application after the implementation of new rent control rules earlier in the year, the inventory of proposed purpose-built projects rose to 33,787 units by the end of the year, with 5,410 units announced during Q4.
“Persistently strong rent growth throughout 2017 was simply the result of demand fundamentals for renting far outweighing supply,” said Shaun Hildebrand, Urbanation’s senior vice president, in a press release. “This has raised the confidence of developers to add more units to the pipeline, a trend that will need to continue in order to meet future housing needs for the GTA.”