According to the 2016 Rental Market Report released by the Canadian Mortgage and Housing Corporation (CMHC), it’s a good time to be the owner of a rental property. With rental vacancies at an all-time low, landlords are thrilled that their units are almost fully occupied and their cash flow is secured.
GTA Rental Vacancy Rate & Average Rents
The rental vacancy rate in the Greater Toronto Area (GTA) for 2016 is a shocking 1.3%, which means there is not a lot of choice for those seeking affordable places to live. And affordable can be a rather subjective term, as the cost of rentals has also increased by about 3%. With the average rent being $1,233 per month, renters on a budget are not afforded much wiggle room when it comes to their rental options.
The average two-bedroom apartment in the GTA rents for $1,327 per month and three or more bedrooms have an average price tag of $1,515 monthly. For families with children who require as many bedrooms as possible, the rental market looks pretty grim. However a bachelor apartment in the GTA rents for an average of $957 per month, which for the working single person seems more realistic and affordable.
GTA Condo Picture
Condominiums also account for a large part of the rental units in the GTA, and their popularity is on the rise. The vacancy rate for condo rentals dropped to 1% in 2016 due to a high demand for the condo lifestyle. Many condo owners are choosing to rent out their units instead of putting them up for sale due to the lucrative nature of the rental market. A two-bedroom condo will rent on average for just over $2,000 per month. 33% of all condos in the GTA are rental units as opposed to owner occupied.
What is Driving the Hot Rental Market in Toronto?
The rental market is primarily driven by two forces; the cost of home ownership and the large number of millennials and new Canadians that live in the GTA.
Home ownership in the GTA is simply unattainable for many of those who want to live here. The average price of a house in the GTA is approximately $750,000 which carries a mortgage payment higher than what most rental units charge per month. In 2016, the average mortgage cost was just shy of $3,500 whereas the cost of renting is significantly lower as stated above. Many GTA residents are unable to meet the demands of the mortgage costs and so are left with no other option than to rent.
Since home ownership is so expensive, there are not a lot of younger generations diving into the housing market. And the number of millennials in the GTA, people aged 25-44, grew by 3.5%, so there are even more people who are primed for the rental market. The GTA also has the largest population of new Canadians in the country which puts additional pressure on the rental market. When immigrants arrive in Canada they often require time to find employment and establish a credit report before they can pursue home ownership, which leaves them no choice but to rent in the meantime.
Renting is on the rise in the GTA and there is no indication that this will change anytime soon.
To learn more about the Toronto rental market or learn how you can make the most of your real estate investments in a hot market, get in touch with Simplified Rentals today.
If you thought the current Toronto rental market was already at full speed, it might be time to hold onto your hat! If you live in or around the city of Toronto, chances are that you’re very aware of how properties in this city are becoming increasingly unaffordable and out of reach for the average buyer. Last month, the federal government instituted much stricter mortgage qualification rules with the aim of stabilizing the Canadian housing market in the long term.
The Effect of Renters
Federal Finance Minister Bill Morneau introduced new regulations that require borrowers with less than 20% down payment to qualify at the Bank of Canada posted benchmark rate (currently 4.64%) rather than the contract rate (typically in the 2-3% range depending on the length, terms, and lender).
What do mortgage regulations have to do with the Toronto rental market? These restrictions on mortgage qualification will drive more and more would-be buyers into long-term renters as they save for a larger down payment or reject the idea of home ownership altogether. If you are a Toronto landlord, this is a ripe opportunity to market your property to these desirable, stable tenants.
Skyrocketing demand for rental units is being fuelled by strong job growth in the region and a jump in people migrating to the GTA from other provinces, which this year is the highest in 10 years, said Urbanation senior vice-president Shaun Hildebrand. “We’ve never seen numbers like these before.”
The Effect on Condos
The new rules also affect would-be condo buyers. As more would-be condo buyers inevitably struggle to get approval from financial institutions, you can bet to see a spike in the demands for rentals properties which offer similar advantages to condo ownership without the current drawbacks. As demand goes up without sufficient supply to meet that need, so too will the prices, more rapidly than we’ve seen before.
As described by Urbanation, within the city of Toronto, the rent on an average 717-square-foot condo unit reached $2,004 in the third quarter, breaking the $2,000 monthly price barrier for the first time. In the city core, average rents rose 10 percent to $2,145, or $3.10 a square foot. Condo rents grew nearly as quickly in the suburbs, rising 7 per cent from the third quarter of last year to $1,749.
The Effect on Investment Properties
The new mortgage rules will also affect investment property owners and landlords. Come November 30, 2016, the new mortgage rules stemming from the chambers of our nation’s capital will prohibit mortgages on investment properties from being covered by government-backed insurance. With the barriers to entry now higher, there is no better time for existing landlords to take advantage.
The addition of these new mortgage rules will inevitably add more fuel to the fire of Toronto’s hot, sky-rocketing rental market. So for landlords, rental property owners, or those debating about getting a piece of this hot market, there may have never been a better time to jump in. With numbers like these, the demand for rentals will become only fiercer. Talk to Simplified Rentals today about your options.
Exploring the latest in the Toronto Rental Market from Fall 2015 shows little change in vacancies rates, with an increase in rentals. Demand for rental accommodation remained consistent, with vacancy rates remaining at 1.6 percent, and availability rates remaining at 3.0 percent.
As the cost to purchase a home in the Toronto market continues to increase significantly, the market has showed that many residents are delaying the prospect of homeownership and remaining in a rental property for longer.
Condominium Rental Market
As the market has shown in previous years, condominiums are where the rental market has seen the highest amount of growth throughout Toronto, pushing the vacancy rate to 1.8 percent from 1.3 percent last year. Even despite the significant growth in the supply of units, the overall demand of condos continues to remain strong.
High Demand in Downtown Toronto
Significant amount of students moving into the city for school has helped uphold the rental demand in the downtown area, specifically. Additionally, the downtown area has accounted for much of the city’s job growth over the last few years. With this combination of the student population and downtown employment, there has been a natural growth in demand for private rental accommodation with close proximity to both work and school.
Increase in Average Rental Rates
With consistent and increased areas of demand for rental spaces, the average rental rates have naturally seen an increase. The average rent for a two-bedroom apartment increased by 3.3 percent in 2015 in the GTA, up from 2.7 in 2014.
With the additional increase of millennials looking to make their first move away from home, they too have kept the rental demand strong as they represent about 30 percent of the GTA population. But even aside from millennials, elder populations and young professionals who are looking for quality rental accommodation appears to be on the rise.
Purpose-Built Rental Properties Vs. Condominiums
Even as the idea of home ownership is drifting further from reality for many, people are still looking for quality rental accommodations. As a result, newer purpose-built rental properties are increasingly competing with the condominium market. The vacancy rate in 2015 for primary rental units commanding rents over $1,200 remained above the market average, suggesting that some rental households were using increased incomes to enter the condominium market instead.
Summary of the Rental Market in Toronto
So overall, the Toronto rental market has continued to remain strong and steady. With the ever-growing housing prices, demand for rental accommodation continues to see growth particularly within the downtown area. With these growing trends, there’s no sign of the rental market slowing down anytime soon.
Simplified Rentals is committed to providing expert advice to landlords and developers about the Toronto real estate market, with a particular emphasis on residential real estate, single family homes, duplexes, triplexes, condominiums, and apartment complexes. Contact our highly skilled and professional trained staff if you’d like to know more!
Are you looking to purchase an investment property in Toronto? You’ve made the right choice – Toronto is one of the most rewarding rental markets in the world. We’ve put together some statistics and information to demonstrate just how the Toronto rental market stacks up against cities in Canada and the United States.
Low Vacancy Rate Demonstrates that Toronto is a Desirable Market
According to the Canadian Mortgage and Housing Corporation (CMHC)’s Rental Market Report, from 2014 to 2015 the apartment vacancy rate in Toronto remained at a steady 1.6%. This means that for every 1,000 rental homes, apartments, and condos in Toronto, only 16 are unoccupied by a tenant.
In comparison, 2015 saw Ottawa at 3.4%, Montreal at 4.0%, and Calgary at 5.3%. In the U.S market, the vacancy rate for Manhattan was at 2.3%, LA at 2.7%, San Francisco at 3.6%, and Chicago at 4.63%. Only Vancouver (0.8%) is a more competitive rental market.
So what exactly does this mean? It means that in comparison to other major cities in North America, Toronto continues to display a healthy, steady rate of variables that are keeping vacancy rates low. More people are seeking out the convenience, simplicity, and affordability of apartment living. This equates to higher demand for rental properties throughout the city.
Toronto has Competitive Rental Prices
For rental fees, the average one-bedroom apartment in Toronto is priced at $1,085 per month. In comparison, you have Vancouver at $1,062, Ottawa at $941, Calgary at $1,137 and Montreal at $660. For major U.S cities, you’re looking at Manhattan $3,290, LA $1,890, San Francisco $2,802 and Chicago $1,670, just to add some more perspective to the Toronto market.
Booming Rental Market in Toronto
With these comparisons, it’s no wonder that Toronto’s rental properties continue to be as hot as they are. Developers and investors have begun turning their eyes from condo development to purpose-built rental properties as more and more economic trends point in that direction.
With an increasing number of baby boomers downsizing, looking for a more affordable and practical space to live in, combined with millennials transitioning away from homebound life through rental property, the opportunities in the rental market are clearly undeniable.
The fact that vacancy rates have remained extremely low in Toronto shows that the economic fundamentals not only exist, but are also strong enough to make anyone confident about taking advantage of purchasing property for the purpose of renting it out.
The bottom line is that the statistics show the trends that are happening throughout the city and the overall market, and those trends are clearly in favour of the Toronto rental market. So if you’ve been considering opting in on this opportunity, now is the time.
Simplified Rentals helps Toronto property owners and condominium corporations achieve their financial objectives with comprehensive property management services. We have intimate knowledge of the Toronto rental market to help homeowners and investors get the most out of their rental properties, from preparing detailed market analysis reports and setting optimal rental rates, to finding and managing great tenants to pay that rent.
Investing in the Toronto real estate market is one of the wisest financial decisions you can make – but it all starts with finding the right investment property for your budget and your goals. If you dive in too quickly without doing your research, you could end up owning an unprofitable property that drains your money and energy. The right investment property, on the other hand, can be a road to financial bliss – especially with the help of a Toronto property management company like Simplified Rentals. Let’s explore the key components of a quality investment property:
The Right Neighbourhood
An investment property’s location determines many things: the purchase price, the property taxes, the rental income, and even the ease of finding new tenants. For example York University Heights will always be a hot bed for student renters. An investment condo in downtown Toronto will attract high-earning young professionals, while a single family home in Etobicoke will appeal to a young family. If you choose a neighbourhood that attracts student renters, you may have to deal with more routine vacancies and maintenance compared with a single family home with stable tenants. Of course, with a Toronto property management company all of the legwork is taken care of, so the choice is yours.
The Right Property Taxes
Beyond the price, you need to be aware of property taxes. Property taxes will vary based on how popular the neighbourhood is, the quality of schools, and access to city services like police, fire, and waste management. Be alert when hunting for the right investment property – you may get lucky and find the perfect house just a few blocks away from your target with significantly lower property taxes.
The Right Schools
As you might expect, if you want to rent to university and college students you should be located close to a school, or at least within a quick bus/subway/Go-Train ride away. If you are targeting young families, then the closer you can be to a strong elementary school, the better. Additionally, if you decide to sell the home in the future, this proximity to transit and schools will be a positive for buyers.
The Right Profitability
With an investment property, you want to turn an overall profit (ie: sell the home for more than you bought it). Ideally, you also want to turn a monthly profit (ie: bring in more in monthly rental income than you spend in mortgage, taxes, maintenance, and assorted expenses). It doesn’t matter how nice the property is or how awesome the location – if it doesn’t make you money, it’s not the right investment.
Additional factors you’ll want to think about include low crime rates, proximity to major employer hubs, and amenities in the neighbourhood. Once you find the right investment property, Simplified Rentals can handle every aspect of management and help increase your ROI to ensure you have made a wise investment.