Condo rents have dropped over the past six months in the Greater Toronto Hamilton Area (GTHA), with the region seeing the largest six-month decrease recorded in the past 15 years of data tracking with the exception of one outlier.
According to new data from Urbanation, average condo rents in the GTHA have declined 7.4 per cent to $2,732 in the first quarter of 2024. This follows a record high of $2,929 in the third quarter of 2023, a 15-year record for six-month decreases outside of the pandemic period in late 2020/early 2021.
Despite this decline, average condo rents in the GTHA increased 1.6 per cent year-over-year in Q1 2024 to $3.89 per square foot ($2,732 for 702 square feet). Outside of the rent declines experienced during COVID-19, this represented the slowest annual pace of rent growth in nine years and a substantial deceleration compared to the 13.3 per cent annual increase recorded a year ago.
Renters can attribute the slower growth to the supply of newly completed condos on the rental market. In the past four quarters, 23,095 new condos were registered — a 21 per cent increase over the same period ending in the first quarter of 2023 (19,028) and the third-highest four-quarter total ever recorded.
“[A] record high 12,132 new condo units began occupancy in Q1 alone, adding further ‘shadow’ rental supply to the market,” the report notes.
Buildings registered in the past four quarters represented a record 24 per cent share of all condos listed for rent in the first quarter of 2024. Overall, the 37 per cent year-over-year increase in condo rental listings more than doubled the 15 per cent increase in leases signed during 2024’s first quarter. This pushed active condo rental listings at the end of the quarter up to 5,078 units — a 55 per cent quarter-over-quarter increase and more than double the level from the first quarter of 2023 (2,516).
As for purpose-built rental buildings completed since 2003, rental price growth saw an opposite effect — rents increased 4.5 per cent year-over-year to an average of $4.14 per square foot ($2,933 for 723 square feet). The continued growth in rents for purpose-built rentals came as new supply slowed. After reaching a multi-decade high of 5,779 units for the end of 2023, purpose-built rental completions fell to a six-quarter low of 783 units in Q1.
There was a 2.6 per cent vacancy rate for purpose-built rentals in Q1 of 2024; this is a slight increase from Q4 of 2023 at 2.5 per cent and a modest increase compared to a year ago in Q1 of 2023 at 2 per cent, but it still represents an undersupplied market. Vacancy rates were highest in non-rent-controlled buildings at an average of 3.5 per cent, compared to pre-2019 rent-controlled buildings, averaging a vacancy of only 1.7 per cent.
Over the last four quarters, 5,976 purpose-built rental units have started construction — a 174 per cent increase off the low of 2,182 starts in the four-quarter period ending in the third quarter of 2022.
However, the latest annual total for starts remained below the recent high of 7,540 starts recorded in 2021, and starts were down 21 per cent year-over-year in Q1 of 2024 to 1,329 units.
“While the market remains expensive with rents 15 per cent higher than two years ago, renters waiting for some reprieve in the market have found it thanks to a temporary supply infusion from condo investors,” Shaun Hildebrand, president of Urbanation, said in a statement. “This isn’t expected to last long, and rents should continue rising as construction falls short of demand.”
The GTHA is notorious for its high cost of living. A recent poll shows that Toronto ranks 86 out of 220 cities for rental affordability, with a home price-to-income ratio (HPIR) of 13.9, and a report released earlier this year suggests that the annual cost of “thriving” for a single, working-aged adult in the GTA is between $61,654 and $83,680 after taxes.
