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Rental prices rise sharply in the GTA amid low vacancy, fierce tenant competition

Apartment rents climbed sharply in the Greater Toronto Area in 2017 as population growth and low supply pushed vacancy levels below 1 per cent.

The Toronto Real Estate Board (TREB) said the average rent for a one-bedroom condominium apartment in the GTA climbed to $1,970 in the final quarter of last year, while rent for a two-bedroom condominium apartment rose 8.8 per cent to $2,627.

TREB president Tom Syrianos said the demand for new rental accommodation is continuing to grow in Toronto as the GTA’s population continues to rise.

“The problem is that rental supply has not kept up with the increase in demand in recent years,” he said in a statement. “The result has been low vacancy rates and intense competition between renters for available units.”

The competition is so fierce that some landlords are seeing bidding wars emerge as prospective tenants offer to pay higher rents than the posted rate to win the apartment. Competition “has underpinned very strong growth” in average rents, Mr. Syrianos said.

TREB said the number of condominium apartments listed for rent through the MLS system in the fourth quarter fell 3.4 per cent compared with the same period in 2016, and the number of units leased fell 0.7 per cent as a result. TREB said Toronto’s vacancy rate is below 1 per cent for condominium apartments, so every drop in new listings translates into a dip in new lease agreements signed.

Jason Mercer, TREB’s director of market analysis, said he is concerned that Ontario’s moves last April to expand rent-control protection for tenants will slow the pace of construction of purpose-built apartment buildings and new condominium units aimed at investors.

Mr. Mercer said some condominium owners could also choose to sell their condos and take advantage of the runup in prices rather than continuing renting under the rent-control restrictions.

But some relief for renters may be on the horizon. Urbanation Inc., which supplies data and analysis on Toronto’s condominium market, recently reported that 7,184 new purpose-built rental units were under construction in the GTA at the end of 2017, the highest level in more than 25 years.

Builders launched construction on a total of 3,644 units in 2017, Urbanation said, while the inventory of proposed purpose-built rental projects climbed to 33,787 at year-end.

Urbanation senior vice-president Shaun Hildebrand said strong demand and rising rents are encouraging developers to move forward on rental projects.

“This has raised the confidence of developers to add more units to the pipeline, a trend that will need to continue in order to meet future housing needs for the GTA,” he said in a statement.

TREB also reported Monday on trends for townhouses listed for rent through the MLS system, which tend to have lower rental rates than apartment-style condominium units because more are located outside Toronto’s downtown core in other parts of the GTA.

Townhouse units have seen a more modest rate of rental price growth in the past year, with the average rent for a one-bedroom townhouse rising 3.4 per cent to $1,726 in the fourth quarter, while rents for two-bedroom units rose 6.8 per cent to $2,115 and three-bedroom units rose 0.7 per cent to $2,301.

The comparatively more modest rent increases occurred as available listings for townhouse units grew. TREB said the number of townhouse units listed for rent climbed 7.3 per cent in the fourth quarter.

Urbanation said Toronto had the lowest level of condo rental turnover last year since 2013 as high rents and new rent-control measures led tenants to move less often, further reducing supply of rental units on the market. Urbanation said the average time between same-unit lease transactions was 22.8 months in the fourth quarter of 2017, up from 16.4 months two years earlier.


Demand for downtown Toronto condos heats up

Special to The Globe and Mail

For people vying to get into Toronto’s real estate market in January, it seems that patiently waiting for the quintessential three-bedroom house was not part of the plan.

Once again, sales of condo units outpaced those of homes low to the ground.

Real estate agent Geoffrey Grace of ReMax Hallmark Realty says some condo bidding wars attract as many as 15 to 17 contenders.

Some of Mr. Grace’s clients have been looking in the Queen and King Street West areas, where the fervour is particularly strong.

The demand for condos in these areas has just blown up, with prices keeping pace, Mr. Grace says.

In one case, a unit in a building near King West and Niagara Street sold for $25,000 more than a unit with the same layout sold for just the week before. The unit that sold for less was one floor higher and also had parking, which Mr. Grace estimates should have been worth $40,000 right there.

His clients missed out on the first unit when a bidding war erupted after it was listed with an asking price just below $500,000. When the second one landed on the market, he took his clients to see it immediately – with a cheque and a written offer in hand.

“If you like this, we have to make an offer right now,” he advised them. His clients decided to pass but as he was driving back to the office, Mr. Grace received a call from the listing agent informing him that a bully offer had arrived.

Over the past three weeks or so, suites in the stretch between Spadina and Strachan Avenues have been selling for an average of 108 per cent of their asking price, he estimates.

According to the latest numbers from the Toronto Real Estate Board, sales in the Greater Toronto Area market jumped 11.8 per cent in January compared with the same month last year.

Condos changing hands in the resale market soared 26.7 per cent in January compared with a year earlier. The action was equally split between the 905 and 416 area codes.

Detached houses, meanwhile, only saw sales increase 7.8 per cent and most of that action took place in the 905; sales of detached houses in the 416 actually dipped 5.5 per cent. Townhouses and semi-detached houses also lagged condo suites in sales.

The momentum in prices sheds some light: The price of a detached house soared 26.3 per cent in January compared with January, 2016. The price of a condo apartment in the same period swelled 14.5 per cent.

New listings across all types of housing shrivelled 17.6 per cent last month compared with a year earlier.

Mr. Grace says rules surrounding mortgage insurance and financing are making it harder for some buyers in the segment above $500,000.

House prices have shot up so much, he says, that $500,000 to $650,000 has become a condo range. Not so long ago, buyers could find a pleasant starter home in that tier, but now they don’t want to settle for houses that come with that price tag.

“If you’re looking at a house, it’s going to be a rundown two-bedroom on a major street.”

A condo in that price range, on the other hand, is going to be a nicely finished suite – possibly within walking distance of downtown.

Mr. Grace sat down with one client in his late 20s to talk about his goals. He advised the young man to invest in a property with three units a little farther out from the core. Live in the basement and rent out the other two, he recommended. That way the mortgage and expenses would be covered by the rent and the client could move up to one of the other units when he felt more financially comfortable.

The young man agrees the plan makes financial sense, but he can’t resist the appeal of a two-storey loft with concrete and glass.

“He just didn’t buy into the lifestyle,” Mr. Grace says of the landlord-in-the-basement idea. “It’s a really boring, unattractive strategy.”

On another note, in last week’s column I reported on a talk given by Royce Mendes, senior economist at Canadian Imperial Bank of Commerce, in which he laid out some of the risks to Canada’s real estate markets. One of those risks concerns household-debt levels in this country. To clarify, Mr. Mendes believes Canadian households are as indebted as their U.S. counterparts were before that country’s housing market slid into decline in 2008. He says the quality of the debt in Canada is better, however, because the United States saw a lot of credit flowing to people who didn’t have access before


Move over Toronto, Mississauga has its own condo boom

Rogers family’s M City project promises to be a defining landmark for city’s downtown

Just west of Toronto, the City of Mississauga is experiencing its own condo boom, with such projects as the Absolute Towers, Pinnacle Grand Park, Limelight, and many more.

It may well be an affordable alternative to buyers who can’t find what they’re looking for in Toronto.

Mississauga is Canada’s sixth largest city, and it’s about to get larger. The city issued 3,700 building permits last year, with a construction value of $1.3 billion dollars, and it doesn’t look to be slowing down. A report titled Our Future Mississauga was presented to council last June and addresses the city’s strategic master plan.

In it, there’s talk of density, of highrise development, transit and waterfront development, both residential and commercial. There’s a lot in play here, and a clear goal of these initiatives is to establish a distinct downtown region.
The big news is the recent announcement of M City, a 1.5-billion-dollar mega-project spearheaded by Rogers Real Estate Development. The mammoth, master-planned community will consist of 10 towers with upwards of 6,000 residential units. The 14-acre property was originally purchased in 1963 by the Rogers family to be the site of a transmitter tower.

Soaring 60 storeys from the corner of Burnhamthorpe Road and Confederation Parkway, M City’s flagship tower promises to be a defining landmark for Mississauga’s downtown core and the city’s tallest building.

Urban Capital Property Group was selected to lead the development of the first phase of M City. Partner and urban planner Mark Reeve tells Metro that this is the Rogers family’s first endeavor into condos, and the site has been sitting vacant for a number of years.

“What really triggered some interest in doing something with the property was the city’s initiative with their Downtown 21 plan.”

“The development is oriented around a two-acre central park concept with a parkway link to the north end. There is a green belt system that wraps the downtown core that this development fits into and contributes to.”

Reeve says that M City is much more affordable than anything you’ll find in downtown Toronto.

“The project has a range of product types and sizes to meet a broad segment of the market. We’ll have a starting price point of just under $200,000 for a one-bedroom unit, but we’ll have larger, family-oriented, three-bedroom units as well.”

Sales are estimated to commence in March and there’s a presentation centre currently under construction.


Kitchener house prices linked to GTA spillover effect, says CMHC

Commuter reach now extends past Kitchener-Waterloo and Guelph into St. Catharines-Niagara

CBC News Posted: Jan 24, 2017 3:28 PM ET Last Updated: Jan 24, 2017 3:28 PM ET

High house prices in the Greater Toronto Area are spilling over into nearby markets, especially those within commuting distance, according to the latest report from Canada Mortgage and Housing Corp.

The average house price in Kitchener-Waterloo is now just under $500,000.

But the GTA effect on housing markets may be expanding farther afield than Kitchener, Guelph and Hamilton.

Historically, prospective homebuyers who have found themselves priced out of the GTA have migrated to Hamilton, Barrie and Guelph to buy single-family homes, according to CMHC.

And market valuations in these nearby cities are linked to prices in the GTA, the report shows.


Prices in the GTA and surrounding areas tend to move together, a CMHC graphic shows. (CMHC, based on the Canadian Real Estate Association seasonally adjusted prices)

The federal housing agency now notes that recently people have been moving even farther out, especially to the St. Catharines-Niagara region.

As the price of low-rise homes in the Toronto area has soared, house prices in nearby communities like Hamilton, Barrie and Guelph have also been driven up, said Jean-Sebastien Michel, principal of the market analysis centre at CMHC.

According to CMHC, Hamilton – roughly 70 kilometres from Toronto – is the Ontario market that’s most sensitive to housing prices within the Greater Toronto Area.

The report estimates that a one-per-cent change in GTA house prices could increase or decrease Hamilton prices by two per cent after three years.


Source: CMHC, based on CREA and Statistics Canada (Canada Mortgage and Housing Corp.)

A $10,000 change in GTA house prices could translate to about $17,000 in Kitchener and Guelph after three years, the report calculates.

Tim Hudak, CEO of the Ontario Real Estate Association, says the lack of supply is the main factor behind soaring detached home prices in the GTA.

“The best way to ensure young families and first-time buyers have a shot at buying a home is by putting more homes on the market,” Hudak said in a statement.

“One way to increase housing stock is to allow developers to build more ‘missing middle’ housing types, like townhomes, duplexes and stacked townhomes. Increasing the housing stock is necessary to give buyers more options at affordable levels, in areas that make sense for them to be in.”

With files from The Canadian Press