Condominium apartment rents are rebounding fast in Toronto, wiping out most of the price reductions and high vacancy rates seen just a year ago.
At least that’s what the latest data from Urbanation Inc. shows, with a record 5,221 Toronto condo apartments leased in July, up 40 per cent from the same month in 2020. There were only 1,727 open lease listings by the end of July, the lowest figures since this time in 2018, leaving only 0.3 months of rental supply. Rent prices rose too, up 5.3 per cent from June averaging $2,277 a month. Condo rents, often the most expensive rates in Toronto already, are now just 8 per cent off the all-time peak they reached in the third quarter of 2019 ($2,481).
“It was surprising to see how fast it’s coming back,” said Shaun Hildebrand, President of Urbanation. “In the last several weeks, the market has flipped the switch. I was expecting a modest recovery period, getting back toward pre-COVID rents by late next year. Now it looks like we’ll be at pre-COVID levels later this year if we continue at the same pace.”
Real estate agents who work in the condo-investor space are also seeing a rapid return to pre-COVID-19 normal, including everything from bidding wars to leases signed well above the listing price: Mr. Hildebrand confirmed that impression by noting fully 23 per cent of apartments were rented above their list price in July.
“The market’s on steroids right now even more than pre-COVID,” said Nasma Ali, founder of the One Group sales team with Re/Max Hallmark Realty Ltd.
Ms. Ali said things started heating up in the spring as lockdown restrictions began to ease and then kicked into higher gear in May.
“We started getting way more activity because it was the 60 days before July 1. July? Even hotter … August? A complete frenzy. Things are being absorbed so quickly.”
One example of the demand comes from a recent listing of a two-bedroom condo off Carlton Street, attractive to students looking to share the rent.
“A few came in day one over-asking; they know what’s going on. When I listed it I looked at the last thing that leased in the building: fair rent was $3,250, but at once we were getting $3,650, and we were getting offers of a full year up front. The phone was exploding, e-mail was exploding,” said Ms. Ali.
She lost track of how many offers were coming in after it hit 50, and when it was finally rented, hundreds of dollars above asking, she had to send out a mass e-mail to the disappointed hopefuls.
It’s all a huge change from just a few months ago.
“Last year, it was an absolute nightmare, selling a condo, nobody would touch it with a 10-foot pole. And leasing, no one wanted to touch it. ‘Oh my god, I don’t want to be in a highly dense building.’ "
As recently as fall 2020 downtown condo tenants were able to negotiate rent reductions of hundreds of dollars a month, but that worm has turned.
“Now tenants approaching us with price reduction, we’re saying flatly no, bargain hunting is over now,” said Sundeep Bahl of UrbanCondo, a company that helps buyers purchase rental condos, and then acts as a property manager for them with close to 600 condo apartments under management.
One thing Mr. Bahl urged his clients to do was to give a short-term rent reduction if they wanted to keep a tenant: six or seven months with a reduced rent, rather than negotiate a new lease. That way, when it comes time to raise rents, the landlords can raise it off the original lease rate, not off the COVID-19 discount.
Rent rates in Ontario are currently frozen by the provincial government, but Mr. Bahl expects clients with units that are not rent controlled – which includes anything built after November, 2018, will seek to jack up rents as soon as those restrictions ease, perhaps as soon as next year.
“People are going to force us to increase it by $200, $300,” Mr. Bahl said.
He also suspects tenants in rent-controlled units will find themselves tested by unscrupulous landlords.
“You’ll see a slew of units in 2022, where landlords falsely say they are going to move in to the unit. There’s going to be issues. We will not entertain and not indulge in that conduct, that’s when we’ll step away, we’ve been taken to Landlord Tenant Board twice already when this actually happened.”
Mr. Bahl is describing bad-faith evictions initiated by landlords submitting N12 or “Own Use” eviction applications, or the N13 renovation/renoviction applications, though penalties for fraudulently using these evictions to remove tenants for other purposes now run into the tens of thousands of dollars per infraction.
Mr. Bahl says these penalties have not dissuaded some landlords from trying to get away with it.
“There are either no repercussions for what they are doing, or very rare consequences,” he said.
The demand rush being sparked by the return of young professionals and international students to downtown Toronto is even more remarkable when you consider how many new condos have been finished since the pandemic started.
2021 is likely to finish with more than 19,000 new condo apartments completed, after a very robust 2020 that saw more than 22,500 units finished. Estimates vary, but in some cases 50 per cent of newly completed condo buildings are rented out. At the end of 2020, the CMHC reported that 36.5 per cent of all Toronto condo apartments were rented out, or 114,051 of 312,453.
All of that supply is being absorbed: At this time last year there were almost 10,000 condo apartments listed for lease, now fewer than 2,000 are listed, with bidding wars every day.
The other warning sign of higher rents to come? Mr. Hildebrand notes that as home ownership affordability continues to erode in Toronto – with sales prices up 18 per cent in the Toronto area since 2020 – those locked-out buyer hopefuls end up turning back to the rental market.
“These would-be first-time buyers tend have higher incomes, which pushes up rents as well. It’s a perfect storm of demand,” he said.
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