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The house at 124 McGill St. in Toronto. The duplex townhouse is very close to Ryerson University and provides two three-bedroom apartments. The asking price is $1.488-million.Simson Chu/Simson Chu

Toronto’s real estate rental market is firming up.

In the past three weeks, overseas students have begun making plans to return to the city, says real estate agent Simson Chu.

“That’s the trend right now – people are coming back,” says Mr. Chu of Chestnut Park Real Estate Ltd.

Market research firm Urbanation Inc. says a rebound in the second quarter was buoyed by the mass vaccination rollout and gradual reopening of the economy.

Urbanation’s survey of newer purpose-built apartment buildings found a vacancy rate of 5.2 per cent for the quarter ended June 30, which is a drop from a vacancy rate of 6.5 per cent in the first quarter, but still above the 2.1 per cent of the second quarter last year.

The number of new leases signed for condo apartments in the core of Toronto surged 129 per cent in the second quarter from the same period last year, indicating a migration of renters back to the centre, Urbanation says.

The firm’s research shows that renters have remained budget conscious and haven’t necessarily been seeking more space coming out of the pandemic.

In the student accommodation segment, a sudden rush is prompting some students to bid up monthly rents and offer large deposits, Mr. Chu says.

Mr. Chu says students attending the University of Toronto, Ryerson University and George Brown College are searching for condo units and rental apartments downtown.

“I think what I’m observing right now is the students,” Mr. Chu says. “That’s the first wave of coming back.”

Even if they don’t know if they will be learning in the lecture hall, in the laboratory or online, students are putting themselves in position for a return, he says.

One new tenant offered to pay five months’ rent up front. Another, a full year.

“They offered one full year up front without seeing the unit because they are still in China,” Mr. Chu says, and the bloated inventory of recent months is being absorbed.

Mr. Chu recently listed a three-bedroom basement apartment that the owner was willing to lease for $2,500 a month. The student who leased it offered $2,700 a month, he says.

At 7 Carlton St., Mr. Chu is offering a one-bedroom-plus-den unit for $2,750. In April, there were 10 listings at once in the building; at the end of July, he had the only one.

With the rental market stabilizing, some investors are now thinking about the places they own, he adds. Mr. Chu has listed a duplex townhouse at 124 McGill St. with an asking price of $1.488-million.

The Victorian-era house in downtown Toronto has character, front pad parking and a rooftop deck, he says. It’s very close to Ryerson University and provides two three-bedroom apartments.

Mr. Chu says typically three friends will get together and share one of the units.

There’s a separate basement unit as well, he adds.

“That kind of building is perfect for investors.”

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The duplex townhouse at 124 McGill St. has front pad parking and a rooftop deck.Simson Chu/Simson Chu

While the rental market was in freefall, investors were not interested in buying, he says. But the current environment of low interest rates and a strengthening rental market is drawing those buyers back.

Manu Singh, a real estate agent with Right at Home Realty, noticed the shift in mood right after the July 1 holiday.

He worked with an investor who recently purchased a one-bedroom unit at 16 Bonnycastle St., near Queen’s Quay East and the waterfront.

The deal closed on July 1, and Mr. Singh immediately put the unit up for lease with a monthly rent of $1,899.

Until recently, units for lease in the area would have about one showing a week. For this unit, prospective tenants booked 14 showings in one week and four submitted applications, he says.

The successful tenant is a young professional who has been working remotely from London, Ont. She offered $1,950 month, which was higher than the $1,899 the new owner was asking for, and suggested a move-in date two weeks later.

“It was very aggressive,” Mr. Singh says. “It was shocking to see that just within days there was this extreme rush.”

The new owner was happy to have the unit rented so soon after taking possession, he adds.

Mr. Singh says the average monthly rent for a one-bedroom unit in Toronto was $2,082 in the second quarter, which is a slight increase from the average of $1,887 in the first quarter.

The average one-bedroom rent in the second quarter stood 9.4 per cent below the average in the same period last year.

“The lease rates are still a bargain from what they were,” Mr. Singh says.

The agent adds that it has been the case for the past several years that many investors are out-of-pocket in monthly cash flow because their carrying costs for mortgage and expenses are higher than current rents.

“Mainly what people are seeing is opportunity to participate in appreciation,” he says. “You can stomach the few-hundred-dollars-a-month loss if you can see price appreciation.”

Mr. Singh says he is not seeing a lot of good-quality units listed for sale at the moment. When he’s advising buyers, he recommends looking for a unit that is not staged to look its sparkling best. If the decor is tired or the tenant is still living there, the buyer is better able to negotiate a deal.

“The investor wants out – maybe they’ve had a rough year or two,” he says. “Sometimes you can get it for under list price, so we look for those.”

He knows of some owners who are thinking about listing in the fall and expects inventory to increase slightly. But he also expects more potential tenants and buyers will be on the hunt.

“I think we’re going to have a really busy fall market for leases – and for selling and buying.”

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