Toronto's rental market to slow and experience a decline post-coronavirus
Toronto’s rental market is expected to slow down in the post-COVID-19 period.
According to a report by Urbanation, a source of information and analysis on the GTA condominium and rental markets, demand for rentals fell faster than supply in the second half of March, and rents experienced a slight decline.
The average monthly rent in the post-COVID-19 period decreased 0.7% year-over-year, read the report, which looked at rental market results in the first quarter of the year.
While the total lease transactions in the GTA condominium market grew 16% year-over-year during Q1, 2020 to reach 7,002 units (the highest first-quarter total on record), there was a “clear shift” following the pandemic.
“However, in measuring the performance of the market in the pre-COVID-19 and post-COVID-19 periods (the start of the post-COVID-19 period being the week beginning March 16), there was a clear shift in activity,” stated the report.
“The pre-COVID-19 period within the first quarter saw year-over-year growth in leases of 25%, while the post-COVID-19 period saw a steep decline in activity, with lease volume down 25% compared to the same period a year earlier and falling 39% compared to the first half of March.”
Urbanation states that the decline in rental transactions “can clearly be related to the impact of the protective measures and economic uncertainty stemming from the onset of the COVID-19 pandemic, with renters less willing or able to take on a new lease at current rents, as well as the closing of Canadian borders and the logistical challenges with showing units and planning for a move in the current environment.”
Shaun Hildebrand, President of Urbanation, also attributed the decline to job losses, adding that this trend is expected to continue.
“As rental demand declines as job losses mount, incomes are reduced, and immigration shrinks, the slowing in the GTA rental market that appeared in the last half of March will progress for at least the next few quarters given the current economic outlook,” said Hildebrand.
“The impact on rents will be something to watch, which will also be influenced by the timing of the record number of units that were expected to complete this year”
New rental listings decreased by 7% in the post-COVID-19 period from a year earlier, a percentage attributed to the rise in condo completions in the first quarter, along with “tenants unable to pay their rent providing notice to vacate, and some short-term Airbnb units becoming available in the long-term market.”
According to Padmapper, Google search volume for apartments for rent in Canada is down 14%.
“We expect the coming spring months to continue to slow down as rents will most likely feel downward pressure from the lack of demand,” said Padmapper, which analyzes rental data, in its monthly report.
Urbanation reported the vacancy rate surveyed within rental buildings in the GTA completed since 2005 (excluding projects still in their initial lease-up period) averaged 1.1% in Q1, 2020, which is up from 0.8% a year earlier.
Not included in Urbanation’s data are furnished long-term rentals, which experienced a 29% year-over-year increase in listings during the first quarter to 1,382 units.
“The growth in furnished long-term condo rental listings followed the city’s short-term rental bylaw amendments that came into effect in November,” said the report.
Earlier in April, Ontario banned short-term rentals like Airbnb during the COVID-19 pandemic.
The suspension will likely cause another increase in furnished long-term condo rental listings, a number that will be captured in Urbanation’s second-quarter analysis.