In the first year or so of the coronavirus pandemic, the unthinkable happened: The rental market, from Toronto to Vancouver, collapsed. After years of meteoric growth for a typical one- or two-bedroom apartment, the market cratered and tilted in favour of renters over landlords and property management firms. Indeed, there was a lot of reshuffling during this span, giving tenants an opportunity to find a better place and lock in lower rates amid price controls. There were many factors that led to the drop in rents throughout the Toronto rental market and the broader Ontario real estate market.
For one thing, condominium units flooded the market due to families fleeing the major urban centres. The other factor was that certain jurisdictions prohibited using Airbnb and other short-term rental platforms.
Now that the real estate sector is on the other side of the COVID-19 public health crisis, conditions are normalizing, sending the cost for an average unit through the roof.
How Are Recent Changes in the Ontario Real Estate Market Impacting Rentals?
According to a new study by Bullpen Research & Consulting, the average monthly rental rate surged at an annualized pace of 16.5 per cent in May to $2,327 per month in the Greater Toronto Area (GTA). The year prior, renters paid an average of $1,998.
This assessment includes single-family homes, rental apartments and condos in the GTA.
Here is a look at the GTA municipalities with the highest percentage gains recorded in the month of May:
- Toronto: +19.8 per cent
- Burlington: +18.3 per cent
- Etobicoke: +17 per cent
- Mississauga: +12.9 per cent
- Oshawa: +12.4 per cent
- York: +12.2 per cent
- Oakville: +11.2 per cent
- North York: +10.2 per cent
- East York: +8 per cent
- Brampton: +4.4 per cent
- Markham: +3 per cent
- Scarborough: +2.5 per cent
Interestingly enough, Vaughan was the only place in the GTA that witnessed its average rent decline by 6.6 per cent, to $2,072.
Nationwide, the average rent for all Canadian properties advanced 10.5 per cent on a year-over-year basis, hitting $1,888. Vancouver topped the list at the national level, soaring 19.9 per cent year-over-year to $2,377 for a one-bedroom apartment.
With the COVID discounts soon vanishing from the rental marketplace, this corner of the housing market could soon fully recover from the peak of $2,365 in May 2019.
“Rents really shot up in May; [it] caught us off guard,” said Ben Myers, president of Bullpen Research & Consulting, in a statement. “We’re still not back to those pre-pandemic rent highs from the fall of 2019, but things are definitely trending in that direction.”
So, what’s happening?
While there are many variables, the main factor has been declining supply. This has been a common theme throughout the Ontario housing market, so it is not entirely shocking that inadequate stocks are ubiquitous in the Toronto real estate market.
Demand throughout the Ontario rental market is intensifying, too.
As interest rates start climbing, which has been slowing the broader Canadian real estate market, prospective homebuyers are delaying their purchases. Many households are waiting to see how much further residential properties could tumble after travelling in a downward direction in recent months.
The Canadian government has reopened its borders, and Ottawa is looking to play a game of catch-up on the immigration front. The federal government aims to welcome approximately 1.2 million newcomers into the country over the next couple of years, with many arriving in the GTA.
Students – domestic and foreign – are returning to in-person classes, so they will need to battle for limited units, too. This is the same for workers who are being forced to return to the office and perhaps find a place to live closer to work.
“The typical seasonal increase in demand in the spring, coupled with renewed interest in more expensive downtown properties in Vancouver and Toronto, also contributed to the rise in rents nationally,” Myers added.
Indeed, with so many people returning to either the GTA or the rental market, there will be fierce competition comparable to what occurred in the home-buying process of the last two years.
Looking ahead, there is no reason to suggest that price growth in the rental market will slow down any time soon, study authors warned.
“Uncertainty in the ownership housing market and the delay in delivering new supply due to supply-chain delays and labour stoppages should continue to put upward pressure on rents into the fall of this year in the face of increased demand,” the report stated.
Perhaps it is time to brace for bidding wars for a bachelor apartment in the heart of Toronto.