A woman walks past condominium buildings in Toronto’s Liberty Village neighborhood on July 13th. CARLOS OSORIO / Reuters
It is once again a homeowners market in Toronto. Condominium rents reached an all-time high during the second quarter of this year, as rising loan costs pushed residents into the rental market and more people returned to the city.
In the Toronto area, the average monthly rent rose 17 percent to $ 2,533 over the past four quarters, according to industry research firm Urbanation Inc., with the rental of a typical studio condo increasing by 25 percent during this period.
Rental rates have risen rapidly since the Bank of Canada began raising interest rates to control inflation. The benchmark interest rate has risen 2.25 percentage points in five months, making it difficult for potential home buyers to qualify for a mortgage, cooling the real estate market and raising the specter of an economic slowdown.
According to Urbanation’s calculations, condominium owners assumed an average monthly cost of $ 3,125 during the second quarter, when mortgages had an interest rate of about 3 percent. The average rent for a similar condo unit was $ 2,533. This means that the average monthly rent was almost $ 600 less than the average monthly property cost. And that was before the massive rise in interest rates by one percentage point last week.
Now, with mortgage rates close to 5 percent, Urbanation said condominium owners are likely to pay an average of $ 1,100 more a month than tenants. “This will provide more fuel for the rental market as more first-time buyers are left out of the property market,” the report said.
The report shows a sharp jump in Toronto rents, echoing findings from other major cities
This relatively new group of tenants is increasing the demand for rents in a city that was already facing a shortage of affordable housing.
“It’s an extreme challenge to secure even semi-affordable property,” said Reuben Labovitz, sales representative for real estate broker Fox Marin, which has negotiated nearly 100 leases in the city so far this year. . Mr. Labovitz said rental properties are picking up multiple offers and described the situation as a 100% owner-occupied market.
In addition to buyers becoming tenants, high school students are returning to face-to-face classes and employers are pushing their staff to return to the office.
Mr Labovitz said a segment of his clients are people who fled to the suburbs when the city closed during the strict closures of COVID-19 in 2020. He said some of these workers were told to return to the office in the fall.
Flats owned by individual investors form part of the rental market. Apartments, or homes built specifically for the rental market, make up the rest.
The vacancy rate for specifically built apartments fell to 1.4% in the second quarter from 5.1% a year ago. Urbanation said the new supply of apartments and condominium units will be reduced due to rising construction costs and regulatory delays.
It is anticipated that the construction of thousands of condominium units could be canceled due to rising construction and loan costs. According to Urbanation, last year about 5,000 units of prefabricated condominiums were sold for less than $ 1,000 per square foot, making them economically unfeasible to build under current financial conditions.
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