The Rental Market Is Back!
The red hot Toronto rental market is back in full swing!
I spent a couple years living and working in Manhattan, from early 2007 to mid 2009. I worked for a large consulting firm whose major clients included large hedge funds, private equity firms, and other financial companies. I remember very vividly what it was like to be in NYC during the financial crisis. Seemingly overnight, the world changed. Companies were laying off employee by the thousands, bars were full during the day with people who had just lost their jobs...all the stories you read or heard about were true.
I remember one moment in particular in late 2008. A managing director at our firm came by and told us all to stop working on projects for certain clients because we weren't sure if they would even be around next month, let alone be able to pay their bills. It was a little surreal.
I also remember March 2009, during a time when stock markets around the world were in freefall, a bunch so-called financial "experts" on CNBC were telling everyday Americans to sell all their stocks, move into cash, and prepare for the worst. They were convinced there was more pain coming and they wanted to look like geniuses by telling people to sell.
Those experts were so sure that markets were going to keep falling that they were willing to stake their reputations on live TV. And you know what happened? That was the absolute bottom of the market. It was the absolute worst possible time to sell. Those "experts" got it wrong, and nobody called them out on it. I think about that a lot. That "expert" advice cost of a lot of people a lot of money.
There two things that you need in order to predict a market - the direction and the timing. And it's nearly impossible to get both right without a ton of dumb luck.
I think about my time in NYC a lot and it's one of the reasons I never even try to predict what any market is going to do. My world revolves around Toronto real estate, I live and breathe it every single day and even still, I have no idea what will happen tomorrow. Nobody does. I own a lot of real estate in Toronto, I'm a landlord many times over and I believe in real estate as a long term investment. And I sell real estate for a living. But I will never guarantee what the market will do after today. That would be foolish of me. I only know what is happening in this exact moment, and what happened leading up to today. That's it. So it makes me laugh when other agents or economists (or even worse, journalists) publish detailed analyses on where they believe the real estate market is heading, where rental prices will head and why...and then nobody calls them out after their predictions end up being completely wrong. And believe me, almost every single one of them are always wrong. It's easy to say "the market will go up long term". But what's impossible to say is what the market (any market) will do next month. Or next year. Or tomorrow. And yet so many people continue to try, and so people continue to listen.
Last month I wrote a blog about how the rental market in Toronto had finally bottomed after a horrendous year. You should probably read that here to get caught up. But the only way to know when a market has actually bottomed is after it's already done so. Earlier in 2021, when the rental market was absolutely horrible for landlords, it was impossible to know that things were going to get better very, very soon. Companies still had no plans to bring employees back to the office, schools were still closed, immigration was non-existent, the city was still in lockdown, and the idea of a booming downtown seemed so far into the distant future that it just felt like rental prices had no reason to go up.
But just when you think a market is supposed to do something, it does the opposite. Once June hit, the market flipped. People started coming back to the city. Students started coming back. Young professionals who moved away started coming back in waves trying to lock in a deal while they still could. I started getting more and more calls from people who were moving to Toronto for work - from Montreal, Vancouver, London, and from overseas. There was a definitive and major increase in demand and it seemed to show up all at once.
Right now, the rental market is on fire. Like, it's bananas. Multiple offers are back. Rent prices are up...way up from where they were just a couple months ago, and finding a place is more competitive than it's been in a very long time.
Remember when you could get a studio in the fall of 2020 for $1400/mo? Like, when nobody wanted to rent a studio? Or when you could get a 1-bedroom downtown for $1600/mo? Or a 2-bedroom with parking for $2400/mo? Those days are gone. Poof, just like that, the incentives are gone. The rent discounts are gone. The deals are gone.
If you really think about it, most people still aren't going to the office. Most people can still work from home and likely will for at least a few more months. Universities are still undecided if in-class lessons will take place this fall, and online options will likely still be available. The borders are still technically closed making it very difficult for people to move to Toronto. And yet, people are looking for rentals downtown en masse, seemingly overnight. And nobody saw it coming. That's what markets will do.
For landlords, the good news is that you no longer need to make concessions for your tenant who might threaten to leave if you don't lower the rent (yes, that happened A LOT last year). And if your tenant is leaving, it's not as worrisome now because finding a new tenant is much, much, much easier than it was just a few months ago. And you'll likely get more in rent than you might think - or at least more than you did last year with almost certainty. I've personally been surprised by the demand on several of my rental listings, many of which are renting over asking with multiple offers. So there's finally some light at the end of the tunnel for landlords.
Oh, and the Ontario government quietly announced that the rent increase limit for 2022 will be set at 1.2%. So the era of rent freezes that came into effect for 2021 are coming to an end. Another small relief for landlords out there after a horrendous 16 months of rental pain. Interesting how the announcement was done under the radar, with no press release, no news conference, or any real attention drawn. Almost like they didn't want anyone to know...
Have you checked out my previous blog posts?
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Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)