Rise in new rental building and condos led to lower price, deals for Toronto-area tenants in 2024, report finds

The vacancy rate among purpose-built rental apartments completed since 2000 in the Greater Toronto and Hamilton Area at the end of 2024 reached its highest point since the pandemic, a new report has found.

 

High asking rents and increased competition from new supply — particularly the condo rental market — pushed vacancies up from 2.5 per cent in the fourth quarter of 2023 to 3.4 per cent in the fourth quarter of 2024, the Urbanation report published Tuesday said.

 

That’s the highest vacancy rate in purpose-built rentals since mid-2021, it said.

 

Prices, meanwhile, softened in purpose-built rentals and dipped in the condo market.

 

In both markets, completions were high.

There were more than 5,500 purpose-built rental completions in 2024, 86 per cent higher than the 10-year average.

 

The condo market, meanwhile, had a record high 29,800 completions, and half of those units were listed for rent. While Urbanation doesn’t track condo vacancies, Canada Mortgage and Housing Corp.‘s latest data shows condo vacancy was at 0.7 per cent as of October.

Condo prices dipped despite record leases

As completions rose, the condo market experienced a record-high number of leases being signed in 2024, up 29 per cent from the year before, the report said.

 

In total, there were 55,300 leases signed, Urbanation president Shaun Hildebrand told the Star.

 

At the same time, active listings at the end of the year rose 72 per cent compared to the fourth quarter of 2023 to more than 5,600 units — a record outside of the pandemic, when a mass exodus of people left cities and condos for greater space and greenery.

 

As a result, prices dropped.

 

“Condo owners are very motivated to get tenants in and help pay their mortgage, so they will drop rents quickly in order for the unit to get leased,” Hildebrand said.

 

The average price per square foot for condo rentals decreased 1.8 per cent year-over-year to a seven-quarter low of $3.89.

 

Average monthly asking prices, meanwhile, dropped 4.7 per cent to a 10-quarter low of $2,682 per month — a larger drop than the price per square foot due to an “influx of small units” reducing the average size of condo rentals from 710 square feet in the fourth quarter of 2023 to 690 square feet by the end of 2024.

 

Smaller condos also had bigger decreases in price; “micro units” under 400 square feet saw asking rents drop 9 per cent annually, while units 400 to 499 square feet dropped 6 per cent, and units with 500 to 599 square feet dropped 4.8 per cent.

 

“Rents for the largest units 1,000 (square feet) and over held steady compared to last year,” the report said.

Purpose-built rental apartment prices expected to drop

Despite a higher vacancy rate, purpose-built rental apartment prices grew 0.6 per cent compared to a year prior to the highest average price ever recorded in the fourth quarter of any year, the report said.

 

What that data doesn’t capture, however, is that apartment operators offered more incentives during the last quarter of the year, such as a month of discounted rent, Hildebrand told the Star.

 

“About half of them were offering incentives, and that was from a 15 per cent share at the beginning of the year,” he said.

 

Additionally, there’s usually a “lag” between the time condo rents start to decline and when purpose-built rental prices decline, Hildebrand explained.

 

”(Rental operators) want to be sure that there’s a downward trend in place before they start to reset the rents,” he said.

 

Plus, purpose-built rental apartment buildings “typically can carry some vacancy before they start dropping their rents.”

Hildebrand said he believes prices for rental apartments will start to dip in the coming months.

 

On average, asking prices for purpose-built rentals available for lease cost $4.09 per square foot, or $2,967 a month with an average size of 726 square feet. That price is 18.6 per cent higher than the average of five years ago, the report said.

 

But price changes varied depending on the size of the unit.

 

One-bedroom apartments were the only units to see prices fall, dipping 0.6 per cent annually to $4.26 per square foot (or $2,536 monthly for 595 square feet), the report said.

 

Rents for two-bedroom apartments rose 1.7 per cent to $3.84 per square foot (or $3,327 for 865 square feet).

 

Prices for three-bedroom units increased the most — 4.8 per cent — to $4.11 per square foot (or $4,425 for 1,077 square feet).

 

 

 

 

This article was first reported by The Star