Transactions are down 70% and many are wondering if the Toronto real estate bubble will pop? Rental data recently released has some implications for the short term.
Urbanation just released their rental numbers. (They track the data for newly completed, under construction and proposed purpose-built rentals in the GTA)
Total lease transactions in the GTA condominium market grew 16% and the average rent increased by 2% year-over-year during Q1.
- The pre-COVID-19 period within the first quarter saw a growth in leases of 25%
- 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
- The average monthly rent also decreased 0.7% year-over-year in the post COVID-19 period
Rental supply did not experience the same degree of decline as leases, with new listings decreasing by only 7% in the post-COVID-19 period from a year earlier due to:
- A rise in condo completions in the first quarter
- Short-term (Airbnb) rentals converting to long-term rentals. The short-term rental market has fallen 95% and was recently temporarily banned.
“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. 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”
Most pundits are predicting the return of a strong post COVID-19 real estate market, but I wonder how the slowdown in the rental market will challenge this?
I think that the price gap between condos and freehold will widen as the supply of condos increases with record new construction coming online and landlords selling vacant rentals. The supply of freehold remains flat because we aren’t making anymore houses in the city!
This is a great time to get ready to buy, talk to your mortgage professional and get pre-approved now. I work with some great mortgage brokers if you need one.