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Toronto's housing market offered renters a rare moment of relief as average rents fell for the first time in three years.
Average condo rents fell 1.2 percent year over year in the second quarter, according to Urbanation Inc., a real estate consulting and market research firm — the first annual decline since 2021, following the onset of the COVID-19 pandemic. But Urbanation warns that the respite is unlikely to last long.
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The company's latest report shows that the average rent for a Toronto condo currently stands at $3.97 per square foot, which works out to $2,723 per month for a typical 63-square-meter apartment. Rents fell the most for studio apartments, with rents falling 3.9 percent to $2,047 for a typical 36-square-meter apartment. One-bedroom apartments were not far behind, falling 1.8 percent to $2,450 for 55 square meters. Rents for two-bedroom apartments fell 0.9 percent, averaging $3,143 for 82 square meters, while three-bedroom apartments remained relatively stable, falling just 0.6 percent to $3,988 for 94 square meters.
The 905 area was the only region where rents increased, rising 2.0 percent to $2,610 for a 719-square-foot apartment. In contrast, average rents in the City of Toronto fell 2.1 percent to $2,765 for a 674-square-foot apartment.
Despite the drop in prices, demand for rental housing remains high. Toronto saw a record 16,169 condo leases in the second quarter, up 29 percent from a year ago. Normally, high demand puts upward pressure on prices, but due to the increasing number of listings (total condos up 47 percent; 82 percent for newly registered units), rents have fallen.
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Shaun Hildebrand, president of Urbanation, noted that the current decline in rents is due to a temporary increase in condo completions, but that will ease as new condo sales and construction activity decline, he said.
Construction began on 1,558 purpose-built rental apartments in the second quarter, up 43 percent from the previous year. A total of 3,131 units were built, up 13 percent year-on-year and 190 percent from the start of 2022 – though still 32 percent below the first half of 2021.
During the same period, 23,376 rental units are under construction in Toronto, with another 159,176 planned, including 67,431 approved units.
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However, Hildebrand believes that new construction activity will not keep pace with future demand, which in turn will lead to rising rents.
“Although there has been some improvement in rental housing construction recently, the number of rental housing starts is still far too low to keep pace with demand in the long term,” he said.
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