TORONTO – October 18, 2019: Urbanation Inc., the leading source of information and analysis on the GTA condominium and rental markets since 1981, released its Q3-2019 rental market results today.
Urbanation’s quarterly survey collects market information for each purpose-built rental apartment project that has been completed in the Greater Toronto Area since 2005, comprising a total of 68 buildings and 14,832 units as of Q3-2019.
The average surveyed rent for recently leased units and available units as of the end of Q3-2019 was $2,515 per month, which typically excludes most utility costs and parking costs, with the latter averaging $137 monthly for the GTA. Average monthly rents were essentially unchanged from the previous quarter and up 6.1% from Q3-2018 ($2,370), which represented the slowest rate of increase in two years. On a same-building basis (i.e. excluding new completions), average monthly rents increased by 4.5% year-over-year.
The reduced rate of rent growth arrived even though vacancy remained exceptionally low at a rate of 0.8% in Q3-2019, up only slightly from a 0.6% vacancy rate in Q3-2018. The results indicate that rent inflation has begun to moderate after a strong escalation in recent years that brought rents up by about 30% compared to three years ago, suggesting that $2,500 per month may represent a near-term resistance level for GTA rental affordability. As well, the 3,157 purpose-built rental units that completed construction in year-to-date 2019 was the highest level of new rental supplied delivered in 25 years, which has coincided with a rise in condominium apartment completions — many of which are used as rentals. While these new completions are not included in the reported vacancy statistics, they have added more choice for renters and alleviated some of the tension in the market.
Rental apartment completions are expected to remain consistent with their current 2019 pace over the next couple years, which should continue to help restrain rent increases alongside further growth in condo supply. However, the Q3 data also showed that longer-term supply challenges will persist as rental construction failed to register growth over the past year. In fact, the year-to-date number of purpose-built rental starts at 2,540 units was down 47% from the same period last year. As of Q3-2019, 11,413 rental units were under construction in the GTA, more than 80% of which were located in the City of Toronto.
Longer-term market imbalances indicate more action required for rental projects to progress through the planning stage. As of Q3-2019, a total of 52,839 purpose-built rental projects were proposed for development across the GTA, rising from 42,432 units a year ago in Q3-2018, with the jump likely aided by the removal of provincial rent regulations for newly built projects.
“The latest data suggests affordability constraints are impacting market growth for rentals, with renters seeking to save on costs by forming more multi-tenant households and substituting to smaller units and less expensive areas of the GTA”
- Shaun Hildebrand, President of Urbanation.
Urbanation’s UrbanRental subscription provides quarterly reports and online historical database access for newly completed, under construction and proposed purpose-built rentals in the GTA and Hamilton-Grimsby, in addition to secondary condominium rentals. Urbanation surveys purpose-built rental projects developed since 2005 for market rents and vacancies through our direct relationships with rental management companies, and our continuous monitoring of information on units becoming available for rent. We regularly conduct in-person site visits and provide full profiles for every new rental project surveyed. Our rental database also tracks development progress for every new rental project under construction and proposed for future development.
Urbanation is a real estate consulting firm that has been providing market research, in-depth market analysis and consulting services to the apartment industry since 1981. Urbanation uses a multi-disciplinary approach that combines empirical research techniques with first-hand observations and site visits. Urbanation offers subscription services and custom market studies covering the new construction condominium and purpose-built rental apartment markets in the Greater Toronto Area.