Has The Rental Market in Toronto Cooled Down?
Despite what the media headlines are saying, rents in Toronto have been falling.
When I was in my mid- twenties, I moved to NYC. It was probably the greatest life experience I've ever had. I was single, with no commitments to speak of, so when the opportunity came up, I jumped on it. Being a twenty-something in Manhattan making decent money working at a very distinguished publicly traded consulting firm with a ton of cool coworkers around my own age is something I will never forget. I still talk about it to this day in random conversations and it's almost like a badge of honour to say "I lived in NYC for a couple years. No big deal."
I still remember how I found my apartment too. Looking back, it was pretty risky but this is why sometimes it's better to just act and trust that things will work out, rather than stress about what you can't control. I was starting my new job on a Monday and I flew into NYC the previous Wednesday. Yes, five days before I was starting work, with no place to live. I had been scouring Craigslist before I arrived, trying to set up appointments a week or two prior to my arrival. But the response was always the same - "contact me when you land because I don't know if the place will still be available in a week". No problem. I arrived in NYC, crashed at a friend's place (if you're reading this, you know who you are and THANK YOU!), and confirmed about 4-5 apartment viewings over the next two days. I mean, how hard could it be, right?
All the places I was looking at were roommate situations, which I was cool with. I've always been pretty good at reading people (thank you to my many, many hours spent at poker tables over the years) so I could always tell if the vibe was right. By Friday, I had narrowed down my search to two places, and by Saturday morning, I had the keys to my new place. It was that quick. And whenever I tell my NYC friends this story, they tell me I was insane because apartment hunting in NYC is probably the most stressful and frustrating process on planet earth. But hey, what did I know?
I do a ton of rentals here in Toronto (for tenants and landlords) and I'm always reminded of my time in NYC. Partly because of how intense the hunt can be but also about the cost of actually living in a dense, urban center. Looking back I was very, very fortunate to find a place super close to work, in a safe building, for an incredible price, within little to no stress. I didn't realize how lucky I was and if I had to do it again, I know I could never get that lucky again. So whenever I work with tenants in Toronto, I make sure they realize that finding a rental isn't always easy. A lot of landlords are scared about getting stuck with a lousy tenant, so you have to make sure you present your profile, income, credit, and references as though you are interviewing for a job. And sometimes, you just have to get a little lucky.
The cost of renting in Toronto has been a topic of conversation for as long as I can remember. And it seems that, apart from the Covid-era of 2020-2021, rents always go up.
But since the Fall of 2023, I've noticed something is different with the rental market. Places are sitting longer, and prices are actually falling. And not just a little. I've seen rents fall anywhere from 5-10% in the downtown core since last summer. That's significant. Not every place, and not every building, but overall prices are down. Looking for a 1-bedroom condo for $2200/mo? Six months ago I would have said there's nothing I can do. Today? Let's go! Need a 2-bedroom for under $3000/mo? No problem. Six months ago? It ain't happening.
So what's the reason for this sudden price adjustment? Is it the cyclical nature of the rental market? That's certainly part of the reason. But this cycle happens every year and it's just so much more pronounced in 2024 that it's hard to ignore. Personally I think rents hit a tipping point in mid-2023. I see first-hand how much renters are making and it did get a little scary that so much of their "great" incomes were going towards rent. I kept thinking to myself "this isn't sustainable".
The real reason rent prices are down? Inventory. There are just so many new condo completions that have hit the market in the past few months that condo rental supply in the core has become somewhat flooded. Make no mistake, we still have a severe shortage of rentals in the city, especially in the core, but this sudden influx of available units has pushed rents down quite substantially and quickly.
So how much inventory are we talking about? Let's take a look at all the units currently available right now in just a few of the newly completed condo buildings in the core so you get an idea of the influx of supply I'm talking about:
Time and Space Condos (at Front and Sherbourne): 160 available units
Peter & Adelaide Condos (at...well, Peter and Adelaide): 73 available units
Central Condos (near Adelaide and John): 98 available units
Nobu Residences (near King and John): 64 available units
No55 Mercer Condos (at Mercer and Blue Jays Way): 93 available units
Prime Condos (Jarvis and Gerrard): 51 available units
123 Portland (Adelaide and Portland): 33 available units
Sugar Wharf Condos (near Queens Quay and Jarvis): 72 available units
Pinnacle One Yonge (at Yonge and Queens Quay): 27 available units
The Well (at Wellington and Spadina): 76 available units
And there are more I'm missing here, and there are more coming...
Units in the above buildings were all bought as preconstruction investments by purchasers 4-5 years ago. The vast, vast majority of those purchasers intended on renting out those units at completion. And now those are all hitting the rental market at the same time, adding fresh supply that simply didn't exist before, which means any pricing power those landlords were hoping for is gone. And that has an immediate impact on every other building in the core as well. Not great news for landlords. Great news for tenants.
For the past couple years, whenever a landlord client has called me to say that their tenant has given notice, my response is usually "that's great. We'll get you more money with the next tenant." But right now, depending on the situation and timing, it's not a guarantee. We'll try, but the market forces are working against us right now.
So for at least the next little while, tenants will get to enjoy a lot more supply, and a lot more choice, while landlords all fight to get their units seen and rented asap. Which means lower rents in the core, at least in the near-term.
Have you checked out my previous blog posts?
If you have a comment, feel free to leave it below. And remember, if you haven't already, please "like" my Facebook page, follow me on Instagram and check back regularly!
Your Toronto condo lover,
Adil Dharssi
Sales Representative
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)
Email: Adil@AdilKnowsCondos.com
