Market Insight for August 2

Toronto’s housing market offered a rare moment of relief for renters, as average rents dropped for the first time in three years. According to Urbanation Inc., a real estate consulting and market research firm, average condo rents were down 1.2 percent year-over-year in the second quarter — the first annual decline since 2021, following the onset of the pandemic. However, Urbanation warns the reprieve isn’t likely to last long.

The firm’s latest report shows the average condo rent now stands at $3.97 per square foot in Toronto, translating to $2,723 a month for a typical 686-square-foot unit. Studio apartments had the sharpest decline, with rents falling 3.9 percent to $2,047 for a typical 395-square-foot unit. One-bedroom units weren’t far behind, decreasing by 1.8 percent to $2,450 for 591 square feet.

Rental rates for two bedrooms dipped by 0.9 percent, averaging $3,143 for 889 square feet, while three-bedroom units held relatively steady, declining just 0.6 percent to $3,988 for 1,041 square feet.

The 905 area was the only region where rents increased, rising 2.0 percent to $2,610 for a 719-square-foot unit. In contrast, average rents in the City of Toronto fell by 2.1 percent to $2,765 for a 674-square-foot unit.

Despite the drop-in rates, demand for rental units remains high. Toronto had a record 16,169 condo lease transactions in the second quarter, a 29 percent rise from the previous year. Typically, high demand applies upward pressure on prices, but due to the surge in listings, rents have decreased.

“Rental supply from condos is set to slow down for the rest of the year,” he added. In the first quarter of 2024, there were 12,132 condos completed in the GTHA. For the rest of the year, Urbanation projects an additional 13,261 units — about equal to what was delivered in the first few months of the year.

“So, with supply moderating and demand remaining strong, I don’t see rents declining much further, especially with vacancy remaining low,” Hildebrand says. “We don’t have an official rent forecast for this year but suffice it to say this will be a slower-than-normal year for rent increases in the GTA.”

And in a few years around 10,708 new condo units in Toronto have an advertised occupancy date in 2028, Hildebrand said, but “what gets delivered that year may be very different. Rents should continue rising as construction falls short of demand.”