26 September 2019

The situation has become better in Montreal, Vancouver and Calgary, where strong apartment and condo construction will provide a new wave of rental units in the next 10 years.

“However, Toronto shows a different picture”, – says RBC senior economist Robert Hogue. “In spite of purpose-built apartment construction growing four times since 2014, the rental supply will hardly reach the demand soon”.

This sharply rising demand is being supported by strong immigration and a higher share of renters, as a home purchase has become less affordable for many people.

“Because of high costs of homeownership, we expect an increase in the number of renters by about 22,200 each year in Toronto,” – says the report.

“In order to balance the market during two years, Toronto’s rental stock needs to expand by 53,500 new rental units.”

Meanwhile, there were only 4,300 new purpose-built rental apartments in Toronto during the previous 12 months, and it’s the largest number in 25 years.

Hogue believes a proportionate level and mix of rental real estate supply is vital for stabilizing rent in Toronto with its vacancy rate remaining lower than 1%.

“When the rate exceeds 3%, real rent usually goes down”, – he says. “That’s why housing measures increasing the rate to about 4% will have a good possibility to improve the situation”.

In Hogue’s opinion, we should forget about lower rents, as Toronto needs to solve certain issues as soon as possible to prevent further rent increase.

“The measures we’ve seen in the previous few years didn’t give the necessary results”, – he noted.

“We need to see the policy aimed at raising the rental stock in Toronto.”