Rents for condominiums leased in the third quarter of 2018 climbed 9.4 per cent year-over-year to an average of $3.26 per square foot, according to Urbanation’s recently released Q3-2018 rental market results.
According to the market results, average monthly rents increased by 7.6 per cent annually to $2,385 as the average size of a unit leased in Q3 shrunk to 731 square feet from 744 square feet one year before.
The number of condominium lease transactions in Q3 reached its highest level in three years at 8,186 units, up five per cent compared to one year ago as slightly more supply became available.
Market conditions relaxed marginally in Q3-2018, but still remained tight. The average time for a unit to remain on the market rose to 11 days from 10 days one year ago, while the leases-to-listings ratio fell to 86 per cent from 88 per cent in Q3-2017, and the percentage of units leased for above asking rent fell from 29 per cent in Q3-2017 to 26 per cent in Q3-2018.
New purpose-built rental construction starts fell from a recent high of 2,635 starts in Q2-2018 to their lowest quarterly level of the past two years, reaching 826 in Q3-2018. The total inventory of purpose-built rentals under construction jumped 56 per cent year-over-year to 11,172 units, its highest level in over 30 years.
The average rent in the 60 purpose-built rental buildings completed in the GTA since 2005 was $3.09 per square foot in Q3-2018 for available units, an increase of 17 per cent year-over-year, partly due to the completion of higher rent buildings over the past year. The availability rate within these buildings was 1.5 per cent in Q3-2018, up from a low of 0.9 per cent one year ago.
The number of proposed purpose-built rentals rose to a high of 39,750 units from a total of 128 projects, up from 30,981 proposed units in Q3-2017.
“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,” said Shaun Hildebrand, president of Urbanation, in a press release. “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.”
Despite the increase in leasing activity in Q3-2018, rental transaction volume to date this year remained four per cent lower than last year, adding pent-up demand to the market and keeping strong upward pressure on rents. The 9.4 per cent growth in per square foot rents recorded this quarter accelerated from the 8.7 per cent annual rate in Q2-2018 to reach its fastest pace of the past year. The strength in rent growth caused the number of units leased for less than $1,800 per month in Q3 to fall by 65 per cent annually.
At the same time, the number of units renting for over $2,500 per month climbed by 43 per cent. High rents are creating strong demand for studio units, which saw an increase of 32 per cent on an annual basis in lease volume during the quarter, and a nine per cent increase in average monthly rents to $1,823. The average rent for a one-bedroom unit exceeded $2,000 for the first time, climbing 11 per cent annually to $2,056. Meanwhile, two-bedroom lease volume fell by five per cent year-over-year, with average rents rising nine per cent to $2,810.