Aggressive competition and bidding wars are back at Toronto’s rental market

The Greater Toronto Area is facing sky-rocketing rents as it deals with a strong lack of supply. The recent report by Urbanation shows that the average condo was leased for $2,733 a month in the third quarter, marking an annual rise by $433 or 18.6%. In case of purpose-built apartments completed since 2005, the average unit was leased for $2,721 a month, which is $333 or 13.9% higher than a year earlier.

As vacancy rates are going down, there is severe competition for rental housing. According to Urbanation, a record 36% of GTA condos were rented for above the asking rate. On average, those condos were leased for a $129 monthly premium over listing price, setting another record.

Shaun Hildebrand, president of Urbanation, noted that such results point to Toronto’s market moving towards aggressive bidding wars.

“The demand is exceeding the supply sharply, that’s why rents keep growing fast,” – he said.

Urbanation report says the rent growth may slow down in the nearest future, as sellers tend to lease their properties right now instead of selling. In addition to it, approximately 16,000 purpose-built rental units are expected to be completed over the next two years.

Nevertheless, the long-term forecasts look less optimistic, with only one purpose-built project of 227 units starting a construction in the third quarter. Many developers either postpone or cancel their rental and condo projects, affected by growing interest rates and higher construction costs. It means we’ll see fewer completions in a several years.

“The economics of building are extremely difficult, that’s why we can see new rental projects on pause these days,” – Mr. Hildebrand added.