Toronto's future condo market not building enough bedrooms for millennial families: report
Despite recent stories of Toronto tenants having their rent sharply increased, a new report shows the average price of a condominium apartment in the GTA actually dropped in the first quarter of 2017 and year-over-year price growth is stabilizing.
The report, from real estate consulting firm Urbanation, comes as the Ontario government is openly considering new rent controls in its upcoming budget — policy talk that began after CBC Toronto's No Fixed Address series examined the Toronto rental market.
However the Urbanation report, released Wednesday, said the condo rental market is showing signs of controlling itself and that "market forces worked together to temper rent increases" in the first quarter of the year.
"I think extrapolating these rare instances of predatory rent increases is not representative of the entire market," Urbanation senior vice-president Shaun Hildebrand said in an interview, in reference to recent stories of double-digit rent hikes for some Toronto tenants.
"Rent is growing and there are some strong reasons why it's growing, but it isn't growing by the extent these stories convey," Hildebrand said.
Supply up, average price down
According to the report, the average price per square foot for a GTA condominium apartment was $2.75 in the first quarter of 2017, down from $2.80 in the the fourth quarter of 2016.
Year-over-year, average rent increased by 8.3 per cent, down from the 11.6 per cent annual increase recorded in Q4-2016.
Rental condominium apartments stayed on the market longer last quarter (20 days) than Q4-2016 (13 days) and fewer units leased for above asking rents (nine per cent) than the previous quarter (17 per cent).
Of course, the relief comes after a full year of steep rental price increase and record high growth.
The report says it's thanks in part to new supply. While the market remains "undersupplied", the report says the 11,315 newly completed condos that reach closing in the past six months helped to alleviate recent pressure on rents.
Hildebrand believes another factor may be tenants simply saying "enough is enough."
"There's probably to some degree a bit of resistance from renters to the level of rent we've been seeing."
Toronto condo rent increases still 'worse than Tokyo'
Geordie Dent, executive director of the Federation of Metro Tenants' Association, isn't surprised to see data showing the condo rental market is stabilizing. But he says the new units are being built in more expensive downtown neighbourhoods
"That's the only place where new stock is and lot of people can't afford it," Dent said in an interview.
"In the rest of the rental market, where people are just looking for a reasonable place, just something they can afford, it's almost impossible to find a place right now."
And while the 8.3 per cent year-over-year increase in condo rent prices was down from the previous quarter, Dent believes it's still rising faster than what tenants can keep up with.
"That's worse than Tokyo," Dent said.
Rent control changes coming
In a statement on Wednesday, Ontario Housing Minister Chris Ballard told CBC Toronto "a package of changes to expand rent control and better protect tenants" will be put forward by the government in the "coming days."
"We can't stand by and watch as Ontarians face dramatic and unfair rent increases, whether they are millennials just starting out or seniors on fixed incomes. People need the peace of mind of knowing that their rent will be predictable and affordable," Ballard said in the statement.
But Hildebrand says information like the data in Wednesday's report should make political leaders cautious when considering new rent control.
Currently, rent can only be increased at the rate of inflation for housing built prior to 1991. For newer buildings, landlords can charge whatever tenants are willing pay.
Hildbrand says additional rent control could discourage developers from building purpose-built rental housing.
"I don't think a purpose-built rental developer is anticipating huge rent increases, but at the same time costs are increasing, interest rates are probably moving higher. They don't want to know that the amount of rent they'll be able to pass on is going to be capped at inflation."