Greater Toronto real estate buyers are paying massive premiums to own. Canada Mortgage and Housing Corporation (CMHC) data shows 2020 rental data. The organization observed, despite more rental vacancies, rents are still rising. More interesting though, they observe that apartment buyers are paying very large premiums for a shot at making big money.
Toronto Rental Rates Increased 4.7%
Greater Toronto rental rates generally increased over the past year. The average price of a rental came in at $1,523 in October, up 4.7% from a year before. In the City of Toronto, that average was only a slightly higher $1,538, up 4.48% over the same period. At first glance that might sound contrary to what you’ve been hearing in the news. That’s because most data published is data that is created by the platform. If you take a second look, you’ll also notice the CMHC’s numbers are much lower than those numbers too. It’s because their sources are more broad.
Toronto Rental Prices Increased, Despite Vacancies Doubling
Greater Toronto rental prices increased despite a massive increase in inventory. The vacancy rate climbed to 3.4% in October, more than doubling the 1.5% seen just a year before. More specifically, in the City of Toronto it climbed to 3.7%, up from 1.5% over the same period. The high priced downtown area, occupying the highest priced rentals, is something else though. Vacancy in the old City’s boundaries is now up to a whopping 5.8%, up from just 2.2% last year. That partially explains why some residents are calling downtown a ghost town during the pandemic.
Most surprising, is Greater Toronto real estate buyers are paying massive premiums to own a condo apartment. The CMHC economists conclude the average monthly cost of owning a condo apartment “is about 23% above renting an equivalent unit.” That’s just renting someone’s condo though. If you look at purpose built rentals, the economist concludes people are paying 87% more to own an apartment, than rent in a purpose built. That’s a fairly large premium to say you’re not a renter.
The recent data does a fairly good job at dismissing any common sense relating to economics. Despite rising unemployment, and greater vacancies – rents are still rising. People have adopted the narrative that the issue is just temporary, and supply will dwindle in the not so distant future. Strangely at the same time, buyers are willing to pay an 87% premium for what is essential a lottery ticket at that premium.
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