A record volume of condominium units is being added to Toronto’s housing supply, which is helping to drive down rental rates. Just don’t expect the trend to last.
Over the first nine months of this year, the Greater Toronto and Hamilton Area notched 23,473 condo unit completions, according to a report from consulting firm Urbanation. Completions jumped 132 per cent from the same period last year and 34 per cent from the previous high in 2015.
This infusion of new supply is putting downward pressure on rents. The average rent for a condo leased in the third quarter fell 3.8 per cent, year over year, on a per-square-foot basis. (Even so, rents have risen 4.7 per cent from two years ago and 17.4 per cent from five years ago.)
These new units were planned and financed many years ago, before a sharp increase in interest rates. Lately, fewer projects are breaking ground. In the third quarter, 585 purpose-built rental units began construction in the Toronto and Hamilton region, down 40 per cent from a year earlier. There were zero rental starts in the City of Toronto in the July-to-September period.
“The latest quarter provided a good lesson that large increases in supply can bring down rents,” Shaun Hildebrand, president at Urbanation, said in the report. “However, this should be viewed as a temporary adjustment as completions for both condos and [purpose-built] rentals will begin to fall dramatically in the coming years given the latest trends for construction starts.”
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