Urbanation: Toronto Rental Price Growth To Cut In Half As New Supply Hits In 2019

Toronto is expecting a lot more real estate supply, and that’s going to be a drag on rental price growth. Urbanation, a leading research firm for developers, is forecasting a big drop in the rate of growth for apartment rental rates in 2019. The firm expects the rise in new apartments to trim growth in half, compared to what we’ve seen in the past few years.


Urbanation is real estate consultancy that’s been around for a looong time. They’ve been providing real estate analysis for the development industry for 40 years. Usually developers are the last place you might expect to hear decent information. However, these folks provide research to help manage risk and project expectations. That makes them less likely to depend on market “enthusiasm” for their reports.

That said, industry forecasts do tend to overlook a few issues that give numbers a positive spin. A few issues with the condo data worth noting are the size of the pool, inclusion of short-term rentals, and Realtor skew. Most of these issues are a result of rental reports being created using just MLS data. We won’t bore you with why that’s an issue today, but you can read about that from our favorite, foul-mouthed, landlording professional here.

Toronto Apartment Rents Increased Over 7%

The rental rate of condo and purpose built rental apartments made huge climbs. Urbanation reports, apartments saw the average rent rise to $2,385 in Q3 2018, up 7.6% from last year. On a square foot basis, the average price per square foot reached $3.26 per month, up 9.4% from last year. Basically, the size of units have been shrinking to help mitigate some of the price increases.

Purpose built rental apartments are making even faster climbs, but still remain more affordable. The price per square foot reached $3.09 per month, up 17% from the year before. The gap between a condo and purpose built rental is now just 5.21%.

Rental Increases Are Unsustainable, Especially With Incomes

Those numbers seem absurdly high? That’s because they’re not even close to sustainable, and may have an issue sticking. Urbanation president Shaun Hildebrand added, “Income growth certainly isn’t keeping pace with this level of rent inflation.” Further adding, “the average tenant’s income is $65,000, which isn’t sustainable.” You can probably already spot the problem, but let’s take a dive into those numbers anyway.

The majority of the average tenant’s income is being eaten up by rent. A household making $65,000 gross will take home an estimated $49,166 after taxes in Toronto. The average condo renter is spending ~$28,620 in rent, or just over 58% of their income. Experts recommend a household spends no more than 30% of their net income on housing expenses.

Renters are now at the point where it’s not just going to be difficult to squeeze them for anymore rent. Households that spend this much will have to cut general consumption, and investment. This is an issue that catches up with the general economy pretty fast.

Toronto Rent Price Growth To Slow In 2019

Rental price growth is projected to slow as a lot more new supply comes online in 2019. “The injection of supply from new investor-owned condos that end up in the rental market could lead to 4 or 5-per-cent rent growth rather than the current near 10 percent year over year levels,” noted Hildebrand. That’ll be fun for Toronto’s fast growing negative yield investor community.

Toronto 1 Bedroom Rental Price Change

The annual percent change in price for a 1 bedroom rental, as reported on the MLS.

Source: TREB, Better Dwelling.

The magic of supply and demand. The city will see a flood of new investor properties released. The increased competition is likely to compress growth. Considering Toronto investors are already having a difficult time filling units with tenants that pay enough rent, this is bad news for productive investment. More “investors” will have to use income to top up rent, further diluting the region’s consumption.

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  • Sammy 5 years ago

    Right, but rents rarely fall. People just keep paying more, as inflation rises.

    • Ethan Wu 5 years ago

      No. TREB data doesn’t go to the early 1990s for a reason. Condo prices dropped in half in some buildings, so a 30% (as ridiculous as it seems today), is quite reasonable. A 30% drop in rents would probably put you back to 2014 levels, lower if inflation adjusted.

  • Yusef 5 years ago

    Oh look at that, half the rate the MSM reported. People think fin-alt fearmongers, but they fear monger as much as MSM pumps irrational exuberance. I thought we were looking at a condo sales boom in January? Not looking like that so far.

  • Trader Jim 5 years ago

    Don’t forget that at $65k with half your money going to rent, you’re likely a young professional that might consider moving to a new region for better rent. This is exactly what happened in the early 1990s, known as “brain drain.”

    The government countered losing our highest, most educated earners by ramping up immigration to ensure that a steady flow of cheap professionals would move to the region, helping to fulfill jobs created by big mega corps looking for cheaper wages in the same time zone. Sound familiar?

  • SUMSKILLZ 5 years ago

    If the condo units were not so absurdly small with poor layouts, folks would double up and split the rent to get below 30% of income thresholds. You can’t even do that with the new builds.

    I recently visited a friend in a new, $950 000, two bedroom, two ensuite bathroom condo with no living room and almost no storage built in. The tiny kitchen had a bar counter with three stools with no room for a kitchen table/dinette or sofa anywhere. Most of us had to stand the entire evening. WTF?…I guess it is designed as an AirBnB, suitcases only, space.

    • Mortgage Guy 5 years ago

      There’s actually only two buildings like that, and quite a few agents I’ve spoken to won’t bother taking clients there. Interesting.

      Most people are forgetting the by building most of the supply like this, you’re now giving incentives to well-heeled professionals to establish a professional suburb far from the city. NYC is a good example of this, with people moving out to Westchester, if you want to have kids. Of course, Toronto has another 5 or 6 real estate cycles before becoming NYC, but building like NYC can accelerate the failure.

      Despite the short-term thinking developers are selling people on, a city won’t grow if young people can’t have a decent quality of life.

  • Bene 5 years ago

    We’ll probably be seeing more cases like this soon.


  • Gregory 5 years ago

    December Condos under Construction – where supply will come from

    In Central Toronto (CMHC data)

    December 2017 20,947
    December 2018. 17, 769

    Down 15%.

    But outside Central Toronto

    December 2017 30,523
    December 2018. 41,331

    Up 35%

    So, Expect a lot better deals in 905 – only an extra 30-40 minute commute. We shall see how much downtown prices get effected

  • Yawn 5 years ago


    You sound scared, and anxious….why for?

  • John Chan 5 years ago

    Realtors in general are the laziest and stupidest people I have ever worked with.
    They are so desperate for sales they will do or say anything.
    I have zero respect for them.

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