Toronto area condo rental rates drop sharply

The Greater Toronto and Hamilton Area (GTHA) condo rental market has experienced a significant downturn, marked by the largest six-month decrease in rent prices in the past 15 years.

According to real estate consulting firm Urbanation, the GTHA reached a peak rental rate of $4.20 per square foot in the third quarter of 2023, equivalent to $2,929 for a 698-squarefoot condo. However, the market has since seen a 7.4 per cent decline in average condo rents. The drop, the most substantial outside of the pandemic period in late 2020 and early 2021, has resulted in an average rent of $3.89 per square foot ($2,732 for 702 square feet) in the first quarter of 2024.

“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. This isn’t expected to last long, and rents should continue rising as construction falls short of demand,” Urbanation president Shaun Hildebrand said, in Wednesday’s quarterly report.

Despite this decrease, yearover-year figures for the first quarter of 2024 show a 1.6 per cent increase in average condo rents. However, this growth is considerably slower compared to the 13.3 per cent annual increase recorded in the same quarter of 2023, representing the slowest pace of rent growth in nine years.

Urbanation said a major factor contributing to the slowdown in price growth is the influx of newly completed condos into the rental market. “Over the past four quarters, a total of 23,095 new condos were registered, a 21 per cent increase over the same period ending Q1-2023 (19,028) and the third highest four-quarter total ever recorded,” Urbanation said.

The data collected by Urbanation also reveals a contrast in trends between condo rentals and purpose-built rental buildings.

Condo buildings registered in the past four quarters now account for a record 24 per cent of all condos listed for rent in the first quarter of 2024. The report also indicates a 37 per cent yearover-year increase in condo rental listings, resulting in 5,078 active listings by quarter-end. This marks a 55 per cent quarter-over-quarter increase and more than doubles the 2,516 units from the first quarter of 2023.

In contrast, rents in purpose-built rental buildings constructed since 2003 have risen by 2.0 per cent quarterly and 4.5 per cent annually, averaging $4.14 per square foot. Urbanation attributes this growth to a decrease in new supply, with completions of purpose-built rental units dropping to 783 in the first quarter, down from a multi-decade high of 5,779 units in 2023.