The cost of renting a Toronto condo hit a record average of $2,806 in August — a 19.5 per cent year-over-year increase equal to $458 a month.
It was the 10th consecutive month that condo rents rose in the double digits year-over-year — increasing 11.4 per cent in the last three months alone, according to an update this week from development tracking market research firm Urbanation.
Condo rents have been exceeding pre-pandemic levels since the spring, company president Shaun Hildebrand said this week.
“It’s not a rebound effect (from the pandemic). It’s actually growth, which makes it all the more alarming how much rents have risen in a short period of time,” he said.
He attributed some of the rent increase to rising interest rates that have slowed home-buying even as the Toronto region is seeing high rates of employment. The Bank of Canada pushed its key lending rate
up another 75 points to 3.25 per cent on Wednesday. That rate was 0.25 per cent at the start of the year.
“Now we have higher-income-earning renters active in the market that would have otherwise bought if conditions were right for them, if affordability was better. They’re able to pay higher rent levels and this is contributing to the exceptionally strong growth that we’re seeing,” said Hildebrand.
Urbanation found that 41 per cent of tenants who rented a condo in August agreed to pay more than the asking price — an average of $132 a month more. The average time condos stayed on the rental market also fell to a record low of eight days last month.
The behaviour is similar to what the rental market saw from about 2016 to 2018; then rent growth began to slow in 2019.
“I think we’ll eventually see that as well,” said Hildebrand. “The market begins to naturally reach some resistance levels as (it) just gets too expensive.”
At that point, tenants start to get roommates or move to older, more affordable buildings and demand begins to slow, he said.
“We could have started to see some early signs of this in the August data. Lease transactions were actually down month over month and year over year even though new listings were higher,” said Hildebrand. “It’s obviously not leading to rents letting up quite yet. But if this continues we could see rents begin to level out.”
Some easing on rents could also come from more balance between the supply and demand sides of the market; there are 30 per cent more listings on the market than a year ago but still less than a month’s supply.
The number of leases signed in August was six per cent lower than July, the peak month for students to sign rental agreements that begin Sept. 1.
There were 155,568 condos on Toronto’s rental market in October 2021 (the most recent numbers available), according to Canada Mortgage and Housing Corp. That compared to 320,152 purpose-built rentals — townhouses or buildings with three or more units.
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