Today’s industry trends that are shaping the rental market.
Experts call 2019 a more balanced housing market compared to last year, however, the market conditions in Toronto remain tight for rentals.
In the real estate industry, everything is interrelated and co-dependent. While the buyer’s market has its own nuances, that are different from the seller’s market, and, in turn, different from the renter’s market, one has an impact on the other.
INCREASE IN RENTAL PRICES
We could’ve seen this one coming. Andrew Scott, a Senior Analyst with Canada Mortgage and Housing Corporation (CMHC) and a specialist in the Toronto rental market, predicts an increase in rental prices for next year. Experts at Rentals.ca agree and forecast the average rental rates to increase by 6% year over year on a national basis in 2019.
The reason behind the potential increase? Continuously rising homeownership prices and tightening mortgage rules (i.e. stress test) - make it difficult and un-affordable to get into the home ownership market. As people delay the home purchase, they opt to rent. This generates higher demand for rentals. Increased demand in rentals is, in part, responsible for the increased rental prices. If it sounds like a vicious circle, it probably is.
Here are some other factors that shape today’s rental market in 2019.
HIGH DEMAND FOR RENTAL PROPERTIES VS LOW SUPPLY
Toronto rental market has been experiencing a strong demand that cannot match the supply for the last few years. Experts across the industry agree that one of the biggest issues facing Toronto is the low supply of rental properties. Dr. Richard Florida, professor at the University of Toronto’s Rotman School of Management, states “We need to build a lot more rental housing at each and every price point.”
To inject a bit of optimism, things are looking up in 2019-2020 as more rentals are planned to be built to accommodate the increasing demand and to increase supply, through Canada’s first-ever National Housing Strategy. This strategy, essentially, is an elaborate and ambitious $40-billion investment to help ensure that Canadians have access to housing that meets their needs and that they can afford.
STRONG JOB MARKET PUTS PRESSURE ON RENTALS
The Canadian economy is booming. According to multiple sources, the unemployment rate is at its record low, hitting a 5.7% unemployment rate. Experts predict an upwards of 150,000 jobs added in the next year or so. This sounds great! Is there a but?
There is, actually. Low unemployment rate means more jobs. As young professionals secure stable employment, competition for higher quality rentals is bound to increase. In Toronto, the impact of the healthy job market on the rentals is even more significant, as it attracts more people annually due to Toronto’s healthy economy and strong diversity.
And experts seem to agree. Our city is an important marketplace for tech companies, specifically. According to BNN Bloomberg, “Toronto’s burgeoning tech scene will be a major factor adding pressure to the city’s already-tight rental market in 2019.”
Jay Frenkel, an Agent Relations Manager at OnlyWith.ca comments “Finding a quality rental property in Toronto at a reasonable price is part art part science. While it might be easier to find a needle in the haystack, our agents have been successful at finding a perfect match for many of our clients in the last little while, despite the shrinking supply. The knowledge of the city, intricacies of the market, and our professional connections, I would say are responsible for such a high success rate. Also, when paired with the right realtor, servicing a dedicated area, our tenants find their home within 2 days and are often moving in within the next 30 days. How do we do this? Preparation ahead of time. We work with the tenant on getting their paperwork ready ahead of the search, so when it’s time to submit an offer - we have it readily available. Today’s market is very competitive, with properties going away within hours after you see them. One of our agents, Steve Lubarsky is typically on standy to prepare the next offer at a moment’s notice. We work fast - it’d take usually about 30 minutes to prepare an offer - to ensure that a client’s first choice of rental is successfully secured.”
IMMIGRATION WILL CONTINUE TO PUT PRESSURE ON THE RENTAL MARKET
Our country continues to grow. By the end of 2021, Canada will welcome more than 1 million immigrants, according to the federal government's multi-year immigration plan.
Approximately 330,800 immigrants are already arriving by the end of 2019. Toronto, specifically, is the single largest destination for immigrants to Canada.
Naturally, such an influx of newcomers puts significant pressure on the housing market, as most immigrants tend to rent before they are ready for home ownership.
An alternative to condo rentals, in Canada we also have (or should have) purpose-built rentals. Urban Toronto calls purpose-built rentals a possible answer to the city’s housing crisis.
See, according to available data “since 1990, Ontario has seen 1,075,779 units built for homeownership and 410,562 condo units, yet only 143,091 purpose-built rental units, meaning rentals have constituted less than 9 % of all new units built since 1990.”
This seems like a big inconsistency and a factor in the ever-present shortage of rental properties.
Ahead of 2019, a total of 42,841 purpose-built rental apartments have been proposed for development for this year with 8 buildings (2,458 units) currently undergoing construction. We are yet to see this plan come to fruition, especially given the fact that only 34 rental projects were built in the GTA in the past 14 years, resulting in 6,723 units.
“CHANGING LANES” INITIATIVE ADDRESSES TORONTO’S HOUSING NEEDS
While, overall, Toronto is experiencing a lot of pressure when it comes to rental market, there are some positive changes as well.
In August 2018, the City of Toronto has allowed the construction of laneway suites in some parts of the city. Homeowners can now enjoy an opportunity to add extra income, and renters benefit from the additional supply of properties on the market at a reasonable price.
What is laneway housing?
A laneway suite is a small living space at the back of a residential lot, detached from the main home, using water, sewer, electricity, and other services of the primary house at the front. While it cannot exist on its own, a laneway unit can be used as a rental property, or for family members to reside in.
Toronto Star calls laneway housing a new frontier in terms of urban development. Now that we’re well into 2019, we see this concept gaining traction more and more, as people start to convert their garages and unused space at the back of their house and building additional properties.
The key benefit of the laneway housing, besides potentially increasing the equity of your home, is that it helps to increase the housing supply in Toronto. But it does so in a subtle manner, without making the city even more dense, and preserving the character of the neighborhood surrounding the house.
A look ahead
Experts predict that in the coming years we should expect companies come forward to offer ready-to-install housing solutions that could be implemented in days, and as fast as the weekend. Evergreen, Canadian charitable organization that’s helping build sustainable cities, has already begun working to transform laneways across the GTA, using sustainable construction and design.
If you want to learn more about the current rental market in the GTA and beyond, reach out to one of our experienced agents at OnlyWith.ca
We take pride in the fact that we've helped thousands of people make the right decision because each one of our agents understands that finding the right property, whether to rent or buy, really means finding a place that you can call home - that feels secure, comfortable, and in-sync with your lifestyle.