As per reports from several industry players, the rental market in GTA has gained strength owing to complementary demographics and a resultant increase in financial transactions of more than 8% as of mid-2019 (year-on-year).
The report also indicates that with extensive buyer movement and high interest in the properties at Etobicoke, York and Scarborough areas, one can expect a much positive scenario for the remaining half of the current year.
This, as per several leading experts, is a result of the persistent increase in the values of properties on ownership basis and the rise in the property market has left the earlier prospective buyers with no choice but to go for renting an accommodation swiftly. As a result, the demand in the rental segment has certainly gone up in the Greater Toronto Area (GTA).
Strong investor interest
The investors have a general perception that investments in rental properties in the Oakville and Oshawa areas will provide higher returns, with an average initial profit above 5 per cent. This phenomenon, coupled with expectations of prices soaring, has been caused by the average rate being capped at 10 basis points, generally sustaining the maximum 3 per cent position.
Vigorous investor interest has led to a 9 per cent increase in the average price, soaring beyond $277,000 per unit. Properties in central Toronto were transacted at an average price of a little over $300,000 per unit. At the same time, properties in Brampton, Scarborough and Oakville traded in the lower band per unit, demonstrating greater affordability.
As predicted in the report, the surge in demand for rentals and positive growth in rent will lead to increased investment activities this year, with investors expanding their search across the metro for tapping into other beneficial locations. The rent control regulations on the new buildings being rolled-back is another factor behind the market seeing higher demand for newly finished projects.
Availability of technical manpower stimulates job growth and housing demand
There has been dynamic employment generation in GTA of almost 81,600 jobs, in the first two quarters of the current year. Out of these jobs, many are technical positions with high paychecks in companies increasing their manpower at their Canadian businesses. In the month of June for the current year, there has been overall employment generation at a 3.4 per cent rate on a year on year basis, which is a considerable increase as against 2.9 per cent rate for the previous year.
Canada’s immigration policy, in comparison to the U.S., is more lenient and a developed technical environment that is supported by incentives from the government, as well as the presence of globally acclaimed universities, has sent many MNCs like Microsoft, Amazon and Pinterest on a talent search spree in the GTA. A strong economy and employment market have been an advantage for the formation of households. This, in turn, has increased demand for apartments, thus contributing towards strengthening the rental market over the last couple of years.
The report also states that almost half of Toronto’s population comprises of immigrants who have been attracted to the city because of more job opportunities in technical enterprises in this cosmopolitan city which also has education facilities of an international standard. These immigrants consider Toronto a place where you get success and financial stability. The demand for housing will grow steadily with the continued acceptance of immigrants and multinational culture spread.
With the implementation of the B-20 mortgage stress test since the beginning of last year, many potential homebuyers do not qualify for a mortgage in Toronto. This coupled with the benchmark price exceeding $875,000 in June for single-family accommodation, poses multiplies challenges to purchase a house, pushing the monthly rate of ownership beyond the limits of the cost incurred for rental housing.
At the end of 2018, the average rent for an apartment in the metro was $1,370 per month, which is a 4.7 per cent increment against the previous year. Despite this, it is still approximately $2,000 less than monthly payments for the single-family bench-marked accommodation. This challenge in the housing market, mainly for debut homebuyers, has caused the demand for rentals to exceed supply, with a vacancy rate stagnant at a rigid 1.1 per cent since last year.
Boost to Multi-Unit housing
Excellent demand for rental units and a continuously rigid market spurred developers to build 2,900 apartments in the GTA rental market over the current year, which is more than the 2,464 purpose-built units that had been completed during the previous year.
Greater focus was placed on Central Toronto, where 1,650 units were added to the rental inventory over the earlier year, followed by York with 430 apartments. The inventory for rental accommodation is predicted to increase at the rate highest for more than two decades. Over 3,500 apartments are to be delivered in the current year, i.e., more than last year’s total of 3,230 units which were completed. The 569-unit King’s Club in Liberty Village will be one of the largest projects scheduled for completion this year.