Soaring Toronto real estate prices are hitting the rental market. Numbers from the Toronto Real Estate Board (TREB) show that the second quarter of 2017 saw a massive increase in price from the same time last year.
Listings Are Falling Faster Than Demand
There was increased demand for rental units across Toronto in the second quarter. TREB stats show that 8,553 rental leases were signed, a slight decrease of 0.1% from the same quarter last year. The number of listings fell to 11,890, a decline of 3.1% during the same period. This means 72% of inventory was absorbed, slightly higher than the 69% absorbed during the same time last year. This would create upward pressure on prices, and it did.
Average Lease Prices Are Up… A Lot
The pressure from absorption wasn’t exactly proportional to the increase in prices however. The average price of a one bedroom lease signed came in at $1,910, a 17% increase from the same time last year. Bachelor units rose to an average lease price of $1,588, a 15% increase from the same time last year. That’s a touch over the Consumer Price Index for inflation, which only came in at 1% last month.
Much Higher Than The Year Before
If you’re not a real estate pro, these numbers may not really mean much, so here’s some context. Rental prices typically don’t rise at around half the rate of real estate prices, they climb closer to inflation – if that. For example in the second quarter of 2016, a one bedroom apartment averaged a lease rate of $1,642, which was a 0.42% decline from the year before. In 2015 the average one bedroom went for $1,649, a 0.06% increase. So the steep climb is a more than historic norms. Just a little.
Rental prices have stalled for the past few years, but such a quick rise is interesting. Were landlord expectations set by soaring real estate prices? Are new landlords buying secondary units, and passing on the rapid rise in prices to tenants? Or was this just delayed increases that landlords have previously held back? We’ll crunch some more data, and see what we can find out.
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