Toronto one-bedroom average renting price soars to $2,502 in October
A limited supply of rentals and rising interest rates mixed with potential homeowners waiting to buy and the return of post-secondary students all factor into the rising costs.
Toronto’s rental housing prices keep on soaring, driven by tight supply and would-be homeowners deciding not to buy because of rising interest rates.
According to a new analysis of data at a major listings site, the average price for a two-bedroom apartment or condo rental in Toronto rose 24 per cent to $3,353 in October from a year earlier. One-bedroom rentals also rose 24 per cent to $2,502. Toronto saw the fastest growth of any large market in Canada over the past year. In Vancouver, one bedroom rentals now go for $2,604 while two bedrooms fetch $3,648, increases of 15 and 19 per cent, respectively.
“The rental market just isn’t equipped to handle this level of demand. … I have not ever seen the rental market as strong as it is right now. And it still has room to grow,” said Shaun Hildebrand, president of Urbanation, a real estate data analysis company which prepared the report for Rentals.ca.
According to data from rental accommodation website Rentals.ca recently, the average rent in October across Canada was $1,976, across all types of properties, from bachelor apartments all the way to three-bedrooms. That’s an increase of 11.9 per cent, well ahead of Canada’s inflation rate of 6.9 per cent.
A rapid series of interest rates hikes by the Bank of Canada has been one of the biggest drivers of the rental market, said Hildebrand. People who would otherwise be looking at buying a house are instead deciding to keep renting.
“A lot of it is a reduction in home-buying activity. As interest rates have started to rise, it’s shut out quite a lot of first-time buyers,” said Hildebrand, who added that many people who’d been looking to buy a home can afford higher than typical rents.
“These individuals tend to be higher income than your typical renter. And with demand at higher income levels, it’s having the effect of pushing rents higher,” said Hildebrand.
The Bank of Canada raised its key overnight lending rate by 50 basis points (half a percentage point) to 3.75 per cent in October, and said more hikes were needed to fight inflation.
In July, the Bank stunned observers by raising the overnight rate by a full percentage point, to 2.5 per cent. The Bank also raised the rate in March, April, June and September by 25, 50, 50 and 75 basis points, respectively. The overnight rate began the year at 0.25 per cent, where it had been since the Bank dropped it three times in a month in March 2020, as the COVID-19 pandemic was declared.
Landlords are also raising rents so they can keep making their own, higher mortgage payments, argued independent real estate consultant John Andrew.
“So many investment properties are heavily mortgaged and as mortgages renew at higher rates, owners have no choice but to raise rents,” said Andrew, a retired Queen’s University professor.
The work-from-home trend during COVID has also played a big role in driving prices, Andrew said.
“It’s a significant factor. People have more money to spend on rent if they aren’t commuting, buying work clothing, etc. and more importantly, they want a nicer, larger place to live if they’re in it all the time,” said Andrew. Even though many offices have moved to a hybrid model, that still means people are spending more time at home than they used to, Andrew said.
Post-secondary students looking for housing as universities and colleges shifted back to in-person learning also helped drive rents higher, said Hildebrand.
“We saw a rush of post-secondary students come back to in-class learning. In particular, a lot of foreign students coming back into major cities. That’s had a profound impact on pushing rents higher and reducing rental supply,” said Hildebrand.
This article was reported by the Star.