Toronto

Toronto Real Estate’s Latest Problem Is Soaring Rental Inventory

Canadian real estate markets are about to see an explosion in rental inventory if Toronto is a sign. Toronto Regional Real Estate Board (TRREB) data prepared by real estate agent Daniel Foch shows an explosion of new listings for rental units in July. The number of new listings has reached a multi-year high, with a lot of reasons to believe there’s going to be more units hitting the market soon.

Toronto Saw New Units For Rent Rise Over 82% In July

The City is seeing rental inventory rise very rapidly, something that hasn’t happened in a very long time. There were 8,346 new listings for rentals in July, up 82.1% (!) from the same month last year. The number of new listings for rentals hasn’t been this high since at least 2016, when condo apartment prices began their rapid ascent. Even though the data only goes back to 2016, this trend likely goes back at least a few more years.

Toronto New Listings For Rentals

The number of new listings for rental properties in Toronto per month.

Source: TRREB, Daniel Foch, Better Dwelling.

Toronto Renters Only Leased 11.5% More Units

The number of renters signing leases has been rising too, just not nearly as fast as new rental listings. There were 4,415 leases signed in July, up 11.5% from the same month last year. This is also the highest number since 2015, but fails to keep up with the increase in new rental listings. The annual number of leases signed usually peaks in July.

Toronto Rental Absorption

The number of rental leases absorbed by the market.

Source: TRREB, Daniel Foch, Better Dwelling.

Toronto Just Saw The Worst July For Rental Absorption In Half A Decade

Fewer or more listings and leases aren’t important as a data point by itself, so you should always look at the ratio. The new lease to leased ratio is just 52.9% in July, which is an improvement compared to the past 3 months. However, the down trend that began in August of last year is still intact. This is the first July going back to at least 2016, where the ratio isn’t higher than 80%.

Toronto New Listings Rental Absorption Rate

The ratio of new rental listings to rental leases accepted.

Source: TRREB, Daniel Foch, Better Dwelling.

Toronto Is Likely To See More Rental Supply Soon

There’s a lot of reasons to see a supply-side expansion, a.k.a. more rental listings hitting the market. Students that have been paying rent and living overseas are unlikely to renew their digs into the school year. AirBNB demand is expected to soften, with the CEO acknowledging demand will never be the same. Then there’s unpaid rent, about 6,000 units officially, that are expected to see evictions soon. Ontario’s new Bill 184 will expedite these evictions, so it won’t be before we see those units also hit the market.

A Surge In New Renters Soon Is Unlikely

There’s not a lot of reasons to expect demand-side expansion, a.k.a. an explosion of renters to hit the market. Immigration is largely on hold, with fewer international students arriving and staying. The credit impact to thousands of people for non-payment will also limit the amount of competition for units. Landlords probably aren’t going to be keen to rent to people that couldn’t pay their rent just a few months ago.

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27 Comments

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  • Reply
    Mortgage Guy 2 months ago

    I’ve said it before and I’ll say it again, if you can’t afford to carry your unit empty until at least the winter (and more likely into next spring), you should consider selling. If you’ll have to lower rent, you should also make sure you can stand the additional loss to income.

    • Reply
      GTA Landlord 2 months ago

      Half of new deliveries were negative cap in Toronto in 2018. This only got worse in 2019 and probably now. When professional landlords began selling their buildings in 2018, that should have been a sign to everyone.

  • Reply
    GTA Landlord 2 months ago

    Units on the low end are humming just fine. It’s the condo speculators that went in for negative gap that are screwed.

    • Reply
      Ian Brown 2 months ago

      I imagine low end is where a lot of the non-payment is going to be.

    • Reply
      Tiger boss 2 months ago

      Next year will be white collar job cuts, so call high end rentals will be dead too. Best to sell investment properties while the market is still drugged up on funny money.

  • Reply
    Ethan Wu 2 months ago

    Client has been freaking out about his tenants not paying full rent. They’re paying about half, ~$1,500 from CERB, but they were already negative cap. So now they’re looking at adding another $1k to the negative cap to keep tenants in.

    Which isn’t a bad idea, since when the person resumes rent, the loss will be relatively small compared to re-leasing at a lower rate. However, it’s gotta be tough to not know if prices are going to keep swelling.

    • Reply
      Gabriele Di Bernardo 2 months ago

      The problem is that the Federal level and the Provincial and Municipal levels did not coordinate with each other. So the FED gave 500 a week to people who were for the better part renting and these people in turn did not pay the rent to the landlords as the Provincial and Municipal governments protected these people from eviction. So they now were protected for 24 weeks and received 12,000 (or 24,000 per couple). They did not pay and now are looking to jump out of the condo they rent into another as now the prices for renting have dropped and they pretty much have cash in their pockets thanks to the Feds. In the end the Homeowners/Landlords will be ruined as there is no way for them to recoup their losses as courthouses will be back logged. By the time they finally get around to seeing a day in court they will have lost their investment properties and this will be sooner than people think. On top of this a lot of people deferred payments on everything and all of these deferrals are now coming to an end.

      • Reply
        Tiger boss 2 months ago

        Gan, thats why you sell the investment property before the CERB end and the market is still drugged up on funny money.

      • Reply
        P 2 months ago

        How big of a problem is this really though? I am a landlord with properties in Phoenix, Atlanta and Columbia SC. I have been living in Toronto for a bit and have been holding off buying until I get settled. I panicked and sold my properties in Phoenix in May and June because of the Eviction Moratorium and general uncertainty. However I may have been wrong about this all. All tenants are paying in full. Tenants don’t want to mess around with all of what’s happening. This is the worst time to screw around with a landlord – even if there are no evictions. Everyone seems to be paying on time – in fact better than pre-covid. I haven’t heard from Toronto landlords what it’s really like for them today.

      • Reply
        Daniella Forje 2 months ago

        You’re really only seeing one side of things. I can have some sympathy for small investment landlords who also got stuck without savings, maybe borrowed money and got loans when they didn’t have enough to back those loans up, and yep that too is partially a systems failure. But how far do you personally get on 2000 a month? Last february I had 2 service industry jobs as well as my own self employment work. I lost all of it in March. I lost my roomate in May. CERB doesn’t cover Toronto rent. You can’t live on $2000 a month, food, shelter, utilities, not possible. So this idea that people are just pocketing a lot a cash is not the reality.

    • Reply
      RR 2 months ago

      The suburbs are where the sales activity is at in Vancouver. Why pay a premium to be in a box, when all of the restaurants are now just boarded up and shut? It’s going to take decades to get things back to how it used to be.

    • Reply
      Golden Oldie 1 month ago

      Don’t feel the least bit sorry for landlords who overpaid.
      Never should have been the business in the first place.
      Greed buries people everytime.

  • Reply
    RR 2 months ago

    Any chance we can get similar data for Vancouver? Thanks!

    • Reply
      VanRealtor 2 months ago

      There’s no MLS leasing information in Vancouver for rentals, so the data kind of doesn’t exist. The CMHC publishes October numbers in December I believe. Closest thing.

  • Reply
    Bob Mortgage 2 months ago

    The indoctrination of real estate as a wealth instrument seems to be real in Canada so being a part-time landlord and leveraging to own multiple properties seems to be favorite pastime of many Canadians.

    Trouble begins in rental market, as less renters, means Canadian with 5 properties can no longer afford all of his 5 mortgages. Causing some forced selling, causing higher housing supply in a environment with lesser housing demand (good luck getting a mortgage with your CERB that 20% of Canadians seem to be on)

    More supply and less demant is prices only go one way.. down. Once the nudge down has been given it will cause more selling.
    Probably need some more of that tax payer money to bail out some of the over levaraged landlords.

  • Reply
    Tiger boss 2 months ago

    In my east Asia community we noticed lots of rental ads for condos and rooms at reduced prices. My friends and I are selling and sold their investment properties before CERB ends.

    My take is the pandemic this fall will be horrible, even if a vaccine is ready by oct. There is no way to vaccinate enough people at this point to prevent a second wave. Vaccines are 10x harder to produce and administer than tests and we still cant get enough tests how can vaccines solve this problem in a couple of months?

    Another issue is large corporations have annual budgets, when the pandemic hit these budgets are already set for the year. When next fiscal year comes around these will be a lot of white collar lay offs. I dont know anyone in the right mind would not sell while the market is still drugged up on funny money. Oh also, China US tension does not help, we are looking at overall slower growth for the coming decade.

  • Reply
    Phil Kessel 2 months ago

    The few people I know that are landlords in Toronto have said nothing has been different at all. That’s a small sample size of only about 9 units, but it seems for the most part renters aren’t messing around.

  • Reply
    alvi 2 months ago

    There is concerned out there that with all the goverment programs out there including a moratorium on evictions that both commercial and residential tenants who are capable of paying rent will not. We shall see if this potential moral hazard becomes a reality. There are always untendended consequences(or foreseen but ingored) when you have such a significant intertervention in the economy

  • Reply
    Ultro 2 months ago

    The biggest problem is to find tenants right now to rent!!! 2 months or more unit empty … too many units on market right now and current tenants can save $300 per month moving out for current condo! Many condos for sale at the moment as investors can not find tenants … very bad situation turning bearish

  • Reply
    Ultro 2 months ago

    Sell condo buy GOLD many investors talking about as they want to double their money in the next year or 2

  • Reply
    Canadian Raccoon 2 months ago

    British Columbia, Fraser Valley, The restaurants Cora’s and others have lineups on Saturday and Sunday mornings. If the restaurants have good food they are packed. In the Fraser Valley, Chilliwack, Agassiz, Hope the houses are way cheaper then Vancouver and sold signs all over the place. People have cashed our from Vancouver and moved to the Valley and paid cash. A lot of Mercedes, BMW and Tesla’s are being driven. In the big cities they are boarded up and riots and homeless all over the place in tents. My suggestion is to sell out and move to the suburbs…quieter and more affordable.

  • Reply
    RealCanuk 1 month ago

    Let the capitalism work and let speculators failed. You cannot force tax payers to bail out speculators (e.g Air&B guys with 5 different properties). Do you hear that Justin?

    • Reply
      George 1 month ago

      Why would Justin Timberlake know anything about real estate? That’s silly. What goes around, comes back around…

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