This past year has seen the highest increase in property prices and rent rates that the Greater Toronto Area has seen in years – and the prices will only continue to skyrocket following the new mortgage rules coming into effect on October 17, according to a recent study.
The Urbanation Inc. study released last Friday found that the average monthly rent for a condo in the Greater Toronto Area increased by roughly nine percent – to a staggering $1,986 – in the third quarter.
In the city of Toronto, the prices have risen even more. Now, for the first time, the average rent for a condo in Toronto is above $2,000, with most 717 square-foot condos costing roughly $2,044 monthly. In the core of the city, the average cost of rent has risen to an average of $2,145 – up 10 percent. The increase in market price has even affected condos in the suburbs, as this market has seen a rise in prices of roughly seven percent since the third quarter of last year.
Unlike the Alberta real estate market, which is seeing staggeringly low numbers of condo sales, condos on sale in the Greater Toronto Area are on the market for an average of only 12 days. Further, the study also found that the number of condos that sold for more than the asking price has doubled since this time last year.
“We’ve never seen numbers like these,” said Shaun Hildebrand, senior vice-president of Urbanation.
“[Rental] was kind of the one area of the market where there was some balance and some level of affordability and that was being maintained. Now, there really is no balance in the marketplace, ownership or rental.”
The staggering increase in demand – and increase in price as a function of the demand – has so far been supported by the strong job growth the area is seeing. Combined with the number of residents moving to the Greater Toronto and mortgage rates Ottawa Area from other provinces, which is the highest it has been in 10 years, there are plenty of people looking purchase or rent.
To add fuel to the fire, the supply level of new condos in the Greater Toronto Area has dropped by nearly 30 percent when compared with the number of condos being built last year. While the demand is still there, condo builders have slowed down the building process due to a lack of land available for construction, delays in permit acquisition, and warnings from industry analysts about the oversupply of condos.
Hildebrand is also expecting the new mortgage regulations put into place by Finance Minister Bill Morneau, coming into effect this week, will only exasperate the situation. Come October 17, all perspective home buyers will have to undergo a stress test to ensure they can still afford to make their monthly mortgage payments, even if the mortgage interest rate goes up to almost five percent. This will push many people to continue to rent instead of buy, says Hildebrand, which will create an increased demand for condos and apartments in a market that already has a dwindling supply.