Monthly rents in Toronto are continuing to soar despite the fact that home prices have dramatically declined in the last six months.
Data released by the Toronto Real Estate Board on Wednesday pegs the average monthly rent of a one-bedroom condominium or apartment at $1,976, an 11.2 percent increase from this time last year. In fact, in a span of just three months, average monthly rents of one bedroom apartments have gone up by $115 — in June, a one bedroom in Toronto cost $1,861 a month.
A separate report from condominium specialists Urbanation confirms this trend. According to them, the monthly rent of a 743 square-foot condo unit now averages at $2,219, a $232, or 10.3 percent increase from a year ago.
There are a couple of reasons why rents continue to climb in Toronto, according to both TREB and Urbanation — lack of supply, rising demand, and Ontario’s new rent control rules.
“The volume of one bedroom without den rentals, typically in the 500-599 range, dropped by 11 percent, while studio rentals fell by three percent,” said the Urbanation report. “The scarcity of available one-bedroom rentals led to a sharp increase in the share of units leasing for over the asking the rent.”
To compound the problem, demand for smaller dwellings, like one-bedroom and studio apartments is rising in Toronto, as an increasing number of young, single, professionals move into the city.
Toronto’s employment growth in fact, edged up 2.4 percent in September, concentrated in the somewhat higher-paying financial services and insurance sectors. This is significant, because the growing ability of a small strata of skilled workers to afford higher rents has the unintended effect of inflating the overall rental market.
In April of this year, the provincial government, in an attempt to bring in some semblance of affordability into the rental market, extended rent control rules to include all residential dwellings built after 1991 — almost all condominiums in Toronto fall into this category. The new rules decreed that landlords had to cap their annual rental increases to 1.5 percent, unless of course, they relist their property on the market and look for a different tenant.
But many experts believe that these rules were misguided — in a market with a rent supply problem, imposing rent control on all buildings has the effect of discouraging developers to build more rental-only housing, something that the city currently lacks.
“The intense competition between renters in Toronto shows no signs of letting up in the near future,” said Shaun Hildebrand, Urbanation’s Senior Vice President. “While it’s encouraging to see that rental proposals are still coming in, the level of new development needs to ramp up significantly in order to meet demand.”