TORONTO – April 20, 2023: Urbanation Inc., the leading source of data and analysis on the GTA condominium and rental apartment markets since 1981, released its Q1-2023 rental market results today.
GTA Rents Rise to Over $3,000
Average rents for units leased and available for lease during Q1-2023 in purpose-built rental buildings completed since 2005 in the GTA reached a record high $3,002. Annual rent growth for purpose-built rentals in Q1-2023 was 13.8% based on units that turned over in Q1-2023 compared to Q1-2022. This represented a slower rate of annual rent increase than recorded in Q4-2022 at 15.1%.
Within the condominium market, average transacted rents reached $2,741 in Q1-2023, with similar annual growth as purpose-built rentals at 13.6%. In the three-year period since Q1-2020, average condominium rents increased by a total of 15.0%, which accounts for rent declines that occurred during the first year of the pandemic.
Rents Surge for Smallest Units
As the market became increasingly more expensive, renters in the condominium market shifted more towards smaller units that have lower monthly costs. As a result, the smallest unit types recorded the fastest rates of rent growth in Q1-2023, led by studios and one-bedrooms-without-dens posting annual rent increases of 17.8% and 17.1%, respectively, with units under 500 square feet seeing rents rise by 21.0% from a year ago. Rents for studio and one-bedroom condo rentals averaged $2,124 and $2,484, respectively, while two-bedroom rents averaged $3,125. The only category of rentals to average rents under $2,000 were micro units under 350 square feet, averaging $1,993.
Vacancy Rate Under 2% for Fifth Straight Quarter
The vacancy rate in purpose-built rental buildings completed in the GTA since 2005 was 1.8% in Q1-2023, edging up slightly from a year ago in Q1-2022 (1.6%) but remaining below 2% for the fifth consecutive quarter. The GTA rental market has tightened due to record high population inflows, low homeownership affordability, and a strong labour market all contributing to an increase in demand while supply has remained low. In Q1-2023, a total of 724 new purpose-built rentals reached occupancy, falling below the quarterly average of 794 completions over the past two years.
Rental Completions Set to Rise during Rest of 2023
According to projected occupancy dates, purpose-built rental completions will increase significantly during the remainder of the year, raising the 2023 total to 7,520 units — a 174% increase over 2022 (2,747 completions) and a 297% increase over the latest 10-year average (1,893 completions). However, the increase in supply is expected to be temporary, as construction starts totaling 2,997 units over the last four quarters represented a 62% decline over the four-quarter total of 7,863 starts in the period ending Q1-2022.
“The GTA rental market remained substantially undersupplied during the first quarter of 2023. Even though supply is set to increase in the near-term, it is expected to be short-lived and insufficient to offset demand. The fact that rental construction has dropped by over 60% in the last year despite rents having risen to over $3,000 is indicative of the economic challenges developers are facing.”
Shaun Hildebrand, President of Urbanation