Condo Rents in Greater Toronto Area Reach New High as Demand Outstrips Supply: Report

'It's concerning to see rental demand and supply deviate so strongly,' says president of research firm

Condo towers dot the Toronto skyline as a pedestrian makes his way through the winter landscape on Jan. 28, 2021. Frank Gunn/The Canadian Press

Condo rents in the Greater Toronto Area have reached a record high as demand exceeded growth in supply for the fifth consecutive quarter, a new report by market research firm Urbanation Inc. finds.

Released on July 19, the report found that the average condo rent in the GTA rose 5.9 percent in the second quarter of 2022 compared to the previous quarter, and 16.7 percent year-over-year.

“As the GTA rental market fully recovered from the effects of COVID-19 and rents reached new highs, the smallest and least expensive unit types experienced the strongest growth rates,” the report said.

Specifically, studio rental prices surged 25 percent compared to last year, with the average price reaching $1,895 per month in the last three months. As for one-bedroom units, the rents were up 19 percent, with an average cost of $2,182 per month in the second quarter.

Two-bedroom units were rented out at $2,862 per month while three-bedroom units cost $3,740 per month on average, according to the report’s findings.

The report added that rent prices for studios were still down 1 percent compared to three years ago, but the story is different for units with dens.

“The largest gains in rents compared to three years ago were found amongst layouts with dens, up 6.4 [percent] for one-plus-dens and 9.4 [percent] for two-plus-dens, as renters sought extra space while working from home during the pandemic,” the research firm said.

New Construction ‘Almost Completely Stopped’

Urbanation also noted that the vacancy rates in the GTA dropped to 1.4 percent from 5.1 percent a year ago, which it attributed to “a reacceleration in population growth, near record-low unemployment, and a sharp reduction in home purchasing power as interest rates increased.”

As rental demand heated up, the report found that new construction on rental units “almost completely stopped” from April to June, with only 87 rental starts, down from an average of 1,916 during the preceding four-quarter period.

“This occurred while 1,263 new rental units began occupancy, resulting in the largest quarterly decline in total rental inventory under construction since Urbanation began tracking the data in 2015,” the report said.

Long-term interest in rental housing continues to grow, according to the report, as there is an inventory of over 103,192 proposed units yet to be constructed, up from 88,258 units a year ago.

Urbanation president Shaun Hildebrand said although the decline in construction might be attributed to data volatility, it was also likely due to rising construction costs, long delays in obtaining approvals, and higher borrowing costs, among several factors.

“With housing affordability at generational lows and continuing to deteriorate, it’s concerning to see rental demand and supply deviate so strongly,” he said.