The number of brand new rental apartments under construction across the GTA has hit a 25-year high as the drive to live downtown remains strong and house prices continue to push home ownership further out of reach.
Some 6,523 purpose-built rental apartments — numbers not seen since the virtual collapse of rental construction in the 1990s — were under construction as of the third quarter of 2015, according to condo and rental market research firm Urbanation.
Some 70 per cent of those apartments are located in the old City of Toronto and three-quarters of those units are within a 15-minute walk of a subway station, says Urbanation senior vice-president Shaun Hildebrand.
An additional 3,820 new apartments units were proposed by developers during that same quarter, says Hildebrand, a 41-per-cent jump year over last year.
Coupled with those new rentals are the unprecedented numbers of new condos still coming on stream across the GTA — some 21,000 this year alone — about 30 to 40 per cent of which are expected to be rented out by their owners on completion.
Yet despite all that new supply, the vacancy rate remains stubbornly low, especially in the downtown core where it continues to hover well under two per cent.
Vacancy rates are far lower, about 0.6 per cent, in purpose-built rental apartments built since 2005, now being sought after by more young professionals, says Urbanation.
Although their rents tend to be higher — about $3 or more per square foot compared to some $2.49 for a rental condo — the buildings are professionally managed and tenants don’t live in fear their unit owner will decide to sell and they’ll be struggling to find another place.
Average rents in Toronto remained relatively stable, averaging $1,850 in the third quarter for the average 743-square-foot unit, compared to $1,870 for a 767-square-foot unit a year ago, says Urbanation.
They grew some three to five per cent in lower-cost suburban rental markets, it notes.
“Obviously, two things are supporting this market,” says Hildebrand. “There continues to be a massive movement of people into the core of the city and a rising share are choosing to rent instead of own, given the high cost of home ownership."
“There’s also more acceptance in the market now for renting than owning than there has been in the past.”
And that demand is expected to grow further as baby boomers start to downsize and cash out on their pricey homes in favour of renting, which is why more condo developers are now looking for potential rental apartment sites as well.
“The numbers just speak to the fact that demand has been able to keep up with supply, even though supply has been running at an all-time high,” says Hildebrand.