The rental market in Toronto has hit a record high, with the average rent for purpose-built rental buildings soaring to over $3,000 in the first quarter, the latest data shows.
The annual rate of increase for purpose-built rentals in the GTA during Q1-2023 was 13.8 percent, based on units that turned over during the same period last year. While this is higher compared to the 4 percent annual rent growth recorded in the same quarter of 2022, it was slower than the 15.1 percent annual rent growth in Q4-2022.
In the condominium market, the average rent reached $2,741 in the first quarter, with similar annual growth as purpose-built housing at 13.6 percent.
The largest annual rent growth was in the smaller-units market, with studios and one-bedrooms-without-dens seeing annual rent growths of 17.8 percent and 17.1 percent, respectively, while units under 500 square feet saw rents rise by 21 percent from a year ago. Rents for studios and one-bedroom condo rentals averaged at $2,124 and $2,484, respectively, while two-bedroom rents averaged $3,125.
“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,” the Urbanation report said.
The only category of rentals with average rents under $2,000 were micro units under 350 square feet, averaging $1,993, the report said.
The vacancy rate for purpose-built rental buildings in the GTA was slightly higher than the same period last year, with the figure for Q1-2023 at 1.8 percent, marking the fifth consecutive quarter that the vacancy rate has remained below 2 percent. The tight rental market in the GTA can be attributed to several factors, including record-high population inflows, low homeownership affordability, and a strong labor market—all leading to an increase in demand while supply remains low, the report said.
According to projected occupancy dates, the report said rental completions are set to “increase significantly” during the remainder of the year, raising the total to 7,520 units completed in 2023. This represents a 174 percent increase over 2022, and a 297 percent increase over the latest 10-year average.
However, the increase in supply is expected to still be insufficient to offset the high demand.
“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,” said Shaun Hildebrand, president of Urbanation.
