The average cost to rent a condo in the Greater Toronto Area (GTA) has increased 6.8 per cent year-over-year to $2.53 per square foot, according to Urbanation’s recent first quarter 2016 rental results. This is compared to the 4.2 per cent year-over-year increase in the fourth quarter of 2015.
The number of condo apartments rented in the GTA through the MLS system in Q1 of this year increased 25 per cent year-over-year to 6,163 units. This comes following a record-breaking 2015, where condo rental transactions increased 19 per cent to 27,155 units.
In 2015, purpose-built construction starts grew to a 25-year high of 3,476 units. This paved the way for a 40 per cent surge in applications for new rental developments in the first quarter of 2016. This surge added 4,284 units to the total proposed inventory of 14,753 units in 42 projects in the GTA. Vacancy rates of the 7,309 purpose-built units completed since 2005 averaged 0.5 per cent.
“The rental market is benefitting from strengthening fundamentals such as employment and population growth, but also quickly eroding affordability and intense competition in the ownership market,” said Shaun Hildebrand, Urbanation senior vice president, in a press release. “Even with record numbers of condos coming up for rent by investors, conditions have tightened, supporting increased rental development.”
Q1 was the fourth consecutive quarter where condo lease transactions grew faster than total listings, which grew by 2.7 per cent year-over-year in the first quarter. The ratio of leases-to-listings reached a record for Q1 at 78 per cent, compared to 64 per cent one year ago. Meanwhile, the average time for a condo to remain on the market fell from 27 to 23 days, and the number of rentals that leased for more than asking rents grew by 59 per cent to 417 units. The number of units rented for more than $3,000 per month grew almost 50 per cent year-over-year to 276 units.
Same sample annual rent growth, which does not include new project registrations, increased to three per cent, while the MLS Housing Price Index for the GTA grew to 11 per cent.
In Q1, a total of 6,107 units in 23 purpose-built rental projects were under construction, down 544 units from the end of 2015. Index rents in these projects ranged from $2.37 to $3.09 per square foot, with about 44 per cent of their units absorbed.