Purpose-built Rental Construction Surges to 25-Year High
TORONTO – October 15, 2015: Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, released its third quarter condo and purpose-built rental market results today.
The number of condo apartments rented through the MLS system reached a new high of 8,398 units during Q3-2015 in the Greater Toronto Area, increasing 18% year-over-year. Average rents grew by 2.0% annually to $2.49 psf. Available purpose-built rental units completed since 2005 averaged $2.34 psf, posting an average vacancy rate of just 0.6%. The number of purpose-built rentals under construction jumped by 76% from the second quarter to 6,523 units — the highest level in more than 25 years.
For the second consecutive quarter, condo leases grew by a faster rate than listings (+11% y/y), marking a departure from the trend witnessed over the past couple years. While supply from new projects continued to grow quickly, turnover rates within the existing stock have declined. As a result, the ratio of leases-to-total listings reached a record 84%, with 95% of listings in new projects that registered in Q3 absorbed within the quarter in an average of just 15 days, compared to a market-wide average of 19 days.
Despite the tightness in rental market conditions, underlying growth in rents remained minimal. Average per sq. ft. rents in the Toronto core remained virtually unchanged from a year ago, while total GTA same sample rents increased by just 0.4%. Several lower cost suburban markets experienced rent growth of 3-5%.
On an absolute cost basis, monthly rents averaged $1,850 in Q3 based on an average unit size of 743 sf, down from $1,870 and 767 sf a year ago.
“Rental demand continues to strengthen due to quickly rising housing prices and increased migration into core areas of the GTA”, said Shaun Hildebrand, Urbanation’s Senior Vice President. “These trends should continue to support the market amidst record levels of condo completions and growing purpose-built construction” added Hildebrand.
Purpose-built Rental Survey
In addition to the 6,523 units under construction, Urbanation tracked a total of 10,117 purpose-built units proposed for development. A total of 3,820 new units were proposed during the quarter, representing growth of 41% from the total proposed inventory in Q2-2015. Over 80% of purpose-built units under construction are located in the City of Toronto and 70% are located in the former City of Toronto, compared to 55% for proposed units.