The average property rental price in the Greater Toronto Area in May saw the largest single-month hike in the past three years, as potential homebuyers back away from rising interest rates, reducing rental supply, a recent report says.
The report, co-authored by Bullpen Research & Consulting and TorontoRentals.com, shows the average monthly rental rate in the GTA surged by 5.7 percent in May. Average rent also saw a 16.5 percent year-over-year increase, from $1,998 in May 2021 to $2,327 in May 2022, which is fast approaching the pre-COVID-19 level of $2,365 in May 2019.
“In a quest to fight off inflation, central banks across the world are increasing interest rates, and as a consequence, in the GTA, resale house prices are softening. In the short-term that is dissuading some would-be buyers from exiting the rental market, reducing rental supply,” the report said.
“This reduced supply coupled with increased demand via immigration, more students, and recent graduates moving out of their parents’ homes have contributed to the rapid rise in rental rates.”
However, as higher rates threaten to push the country into a recession and flatten out the resale prices, prospective buyers are eyeing to leave the rental market when the housing market hits the bottom, the report said.
Breaking it down by housing type, condo apartments led the surge in rental rate, moving from $2,106 per month in May 2021 to $2,623 per month in May 2022, which is an annual increase of 25 percent.
Single-family homes had an average monthly rental rate of $3,233 per month in May 2022, rising from $2,870 per month in May 2021, which represents an annual increase of 12 percent. Rental apartment rents saw an annual increase of 10 percent, rising from $1,898 per month in May 2021 to $2,092 per month this year.
Overall, the change in listing compositions has contributed to rents being lower in 2022 compared to 2019, with single-family homes, condo apartments, and rental apartments having higher rents in May 2022 than in May 2019, the report said.
In addition, as a growing number of super-small condos hits the market, rental rates for this size range are not increasing as quickly, with units from 700 square feet to 1,000 square feet growing at about 15 percent to 16 percent annually, the report said.
Rental rates are climbing at a slightly different pace across municipalities in the GTA.
The fastest growth was seen in the pre-amalgamated area of the City of Toronto, which saw nearly 20 percent annual growth.
The most desirable neighbourhoods prior to the pandemic are experiencing the highest rent growth in 2022, at 15 percent to 20 percent annually, whereas the less desirable communities, or what is known as “outer-416,” saw a more modest annual rent inflation at 5 percent to 10 percent, the report said.
In May, Toronto had the highest average monthly rent for condos and apartments at $2,438 a month, and it also had the highest annual rent increase of 19.8 percent. Burlington and Etobicoke followed closely with average monthly rents of $2,233 and $2,263 per month respectively. Burlington had an annual rent increase of 18.3 percent and Etobicoke at 17 percent.
Coming next in line in annual change in average monthly rent for condos and apartments were Mississauga at $2,224, up 12.9 percent; Oshawa at $1,807, up 12.4 percent; York at $2,083, up 12.2 percent; Oakville at $2,299, up 11.2 percent; North York at $2,102, up 10.2 percent; and East York at $1,898, up 8 percent.
Vaughan was the only city that saw a decline in annual average rental price change for condo and apartment rentals, with a 6.6 percent decrease to $2,072 per month.