A boost in the number of rentals helped lift the Toronto-area vacancy rate slightly last year, but 2019 also saw rents rise at the fastest rate in a decade as demand continued to outpace supply.
The cost of a two-bedroom apartment in the region rose 6.1 per cent in 2019 year over year, according to a report Wednesday from the Canadian Mortgage and Housing Corporation.
According to the CMHC’s Rental Market Report, rents on average for an apartment in the Toronto region increased 6.8 per cent last year to $1,452.
That compares with an annual increase in rents between between 2010 to 2016 of about 2 and 3 per cent.
An increase in the number of new rentals becoming occupied probably helped push up rent prices because newer apartments tend to rent for more than older places, according Jordan Nanowski, CMHC senior market analyst.
But he added that it’s too soon to know if the Ontario government’s end to rent controls on new units has played a role in rent escalation.
“The new (rental) stock added to the market isn’t market-changing,” he said. “It is not large enough to have a significant impact on rent growth.”
Fewer people are also moving, according to the CMHC’s report: the turnover on apartments fell to 9.5 per cent last year from 11.2 per cent in 2018, likely because the average rent on a vacant apartment tends to be about 25 per cent higher.
The GTA’s vacancy rate rose to 1.5 per cent last year, compared to 1.2 per cent in 2018. In the City of Toronto, vacancies increased to 1.5 per cent from 1.1 per cent. Halton Region also saw a rising vacancy rate of about 1.9 per cent from 1.5 per cent. About 3 per cent is considered a healthy vacancy rate.
That slight increase last year isn’t much help for house-hunting newcomers to the city and the fast growing, highly employable cohort aged 25 to 44, looking to rent.
Toronto Mayor John Tory said the high rent-low vacancy scenario is the byproduct of the city’s success in attracting about 70,000 new residents a year.
“We have to be building a lot of accommodation of all different kinds in order to accommodate that growth and success,” he said.
“There is lots of supply now coming on stream, both condos and increasingly rental, but the real key is how much affordable rental is coming on,” he said.
“There are about 8,000 affordable units in the pipeline, which is way more than we had before. We have projects in the stream now that people can move into …as early as next year and there’s some more in 2022 and 2023.”
Families looking for three-bedroom units saw the tightest conditions at a 1.1 per cent vacancy rate, compared to 2.1 per cent vacancy for bachelor suites.
Purpose-built studio apartments rented for $1,138 a month on average. A one-bedroom unit averaged $1,356 with a 1.7 per cent vacancy rate and two-bedroom apartments rented for $1,547 and had a 1.4 per cent vacancy rate.
Condo rental conditions were even tighter, with a 0.8 per cent vacancy rate last year, barely budging from 0.7 per cent in 2018. Those units also saw nearly double the rent growth, letting for 13 per cent more on average year over year.
Get more housing news in your inbox
Get more stories about owning, renting, and just getting by in Toronto and beyond with our Real Estate email newsletter.
The number of rental apartment starts last year rose 6 per cent, comprising 3,435 units in the 12 months ending June 30. Condo starts rose only 3 per cent but accounted for 22,124 units.
Condo apartment completions were down 3 per cent last year, however, according to CMHC. But the stock of rental condos grew by 6 per cent, compared to 3 per cent the previous year. That supply increase was due to a greater share of new units and previously owner-occupied condos that went up for lease.
“Low vacancy rates and higher rent growth have encouraged both new and existing condo apartment owners to lease out their properties as a long-term investment or in anticipation of future price appreciation,” said CMHC.
It found 33.5 per cent of GTA condos were used as rentals last year.