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Rents are soaring in the Greater Toronto Area as the region struggles with a severe shortage of homes. The average condo was leased for $2,733 a month in the third quarter, an increase of $433 (18.6 per cent) from a year ago, according to figures published Thursday by real estate consulting firm Urbanation. In purpose-built apartments completed since 2005, the average unit was rented for $2,721 a month, an increase of $333 (13.9 per cent).

With vacancy rates dropping, there is intense competition for rental housing. Urbanation noted that a record 36 per cent of GTA condos were leased for above the listing rate, based on units rented through the Multiple Listing Service system. On average, those condos were rented for a $129 monthly premium over asking, also a record high.

Shaun Hildebrand, president of Urbanation, said the premiums would suggest that Toronto’s supply-constrained market is leading to bidding wars and aggressive offers.

“The demand has just been way stronger than the supply that’s come online, so rents continue to move up very quickly,” Mr. Hildebrand said in an interview.

Rent growth could moderate in the near future as sellers opt to lease their homes instead, while around 16,000 purpose-built rental units are set for completion in the next two years, the Urbanation report said.

However, the long-term outlook is less favourable. Just one purpose-built project of 227 units began construction in the third quarter. Many developers are delaying or cancelling their rental and condo projects, owing to rising interest rates and higher construction costs, meaning there will be fewer completions several years from now.

“The economics of building are just so difficult that you’re seeing new rental projects stall in today’s market,” Mr. Hildebrand said.

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