Condos Rents grow 11% to surpass $2,000 for the First Time
TORONTO – July 07, 2017: Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, released its Q2-2017 rental results today.
During the second quarter of 2017, the same period in which the Ontario government announced its Fair Housing Plan, condo lease transactions rose to an all-time high, rent growth re-accelerated to a double-digit pace, vacancies dropped to almost zero and fewer new projects were planned for rental development.
Lease Transactions Hit New Record
The number of condo apartments leased through the MLS in the Greater Toronto Area in Q2-2017 totaled 8,328 units in Q2-2017, rising 12% year-over-year to surpass the previous high set in Q2-2015 (8,202 units). Activity was partly driven higher by an increase in new supply, as total listings rose 8% annually in the quarter due to higher condo apartment completions. Even so, the ratio of leases-to-listings reached a new Q2 record of 87% and active listings at quarter-end fell 13% from a year ago to 1,125 units — the lowest Q2 level since Urbanation began tracking the data in 2011 and equal to only two weeks of supply.
Rents See Fastest Quarterly Increase
After moderating to an annual growth rate of 8.3% in Q1-17 from a record-setting increase of 11.2% in Q4-16, condo rents increased by 10.7% year-over-year in Q2-2017, more than doubling the five-year average of 4.5%. Between the first and second quarters of the year, rents grew by 5.1% — the strongest quarterly increase ever recorded by Urbanation. The average rent level surpassed the $2,000 threshold for the first time ($2,073), equal to $2.89 psf based on an average size of 717 sf (down from 741 sf a year ago). Among new condo buildings completed and registered during the past 12 months, rents averaged $3.10 psf.
Rental Tenure Duration Increasing
Urbanation calculated the length of time between condo apartment lease transactions for units with an original lease of at least 12 months, finding that the average duration was 21.5 months for units turning over in Q2-2017, rising from 20.9 months in Q1-2017 and 17.9 months a year ago in Q2-2016. In light of the new rent control measures, which are believed to lead to less turnover and longer tenure durations, Urbanation will continue to track this metric moving forward.
Purpose-built Rents Jump as Vacancy falls to Zero
Urbanation’s survey of purpose-built rental buildings completed since 2005 revealed that average rents for available units increased by 11.0% annually to $2.67 psf in Q2-2017. Vacancy rates within this newer stock of rentals was almost non-existent at an average of 0.1%, declining from 0.5% in the previous quarter.
Despite the announcement of the extension of rent controls to new buildings, the number purpose-built rentals proposed for development continued to increase in Q2-2017, although at a much slower rate than previous quarters. A total of nine projects and 1,719 units were added to the proposed inventory during the second quarter, compared to additions of 2,453 units in Q1-17, 7,323 units in Q4-16 and 5,645 units added a year ago in Q2-2016. The total proposed inventory reached 30,400 units in Q2-17, which includes projects that may no longer proceed as a result of the rule change.
The number of purpose-built rentals under construction totaled 5,821 units in Q2-2017, up from 5,257 units in Q1-2017 but down from 5,992 units last year in Q2-2016.