It's the first annual decline in average rents in three years
Real estate investors are finding conditions in the Greater Toronto Hamilton Area challenging currently with average condo rents posting their first annual decline since the pandemic.
Average quarterly rents for leases signed in the second quarter of 2024 were down 1.2% year-over-year to $3.97 per square foot (psf). The data from Urbanation follows their recent report revealing how a significant share of rental investors in the GTA were losing money in 2023.
For those condo investors with studios, the drop in rent is more worrying – a 3.9% year-over-year decline to $5.18 psf on average. This compares to a decrease of 1.8% for one bedroom (-0.9% to $4.14 psf and less than 1% for two bedroom (-0.9% to $3.54 psf) and three bedroom (-0.6% to $3.83 psf
The City of Toronto is where the real challenge is, with rents here down 2.1% year-over-year to $4.10 psf while rents in the 905 region of the GTHA increased 2.0% annually to an average of $3.63 psf.
However, the decline in rents overall in the region does not reflect weak demand. In fact, the number of condo lease transactions in the second quarter of 2024 reached a record high of 16,169 units, that’s up 29% year-over-year and 60% above the 10 year average.
But renters had a lot more choice with a 47% increase in listings to 21,695 with an 82% jump in newly registered condos.
Meanwhile, vacancy rates increased to an 11-quarter high for newly completed purpose built rentals (2.7%), again higher in the City of Toronto (2.8%) compared to the wider GTHA (2.6%). Rent growth for GTHA purpose-built rentals completed since 2000 slowed to a 2.2% annual pace in Q2-2024, with rents reaching an average of $4.08 psf.
There is more supply to come with 1,558 purpose-built rentals beginning construction in the second quarter of this year, rising 43% from a year ago, and 23,376 purpose-built rentals under construction in the GTHA with many more (67,431) approved and a total of 159,176 proposed.
“Rents are experiencing some softening mainly due to a temporary spike in condo completions, which will subside following the steep drop off in new condo sales and construction activity. While some recent improvement to rental construction has been occurring, the level of starts for rentals remains much too low to keep pace with demand over the longer-term,” explained Shaun Hildebrand, president of Urbanation.
