Toronto area condo rents fall 7% in six months — the largest decline in 15 years

A glut of condominium units on the market has given tenants in the Greater Toronto Hamilton Area (GTHA) rent relief — but it may not be for long.

A report release Wednesday from real estate research firm Urbanation found rents in the GTHA fell by 7.4 per cent from the third quarter of 2023 to the first quarter of 2024.

It is the largest six-month decline recorded in 15 years of the company’s data tracking outside of the pandemic period in late 2020 and early 2021.

Despite the decline, average condo rents in the GTHA increased 1.6 per cent year-over-year in the first quarter of 2024, a substantial deceleration compared to the 13.3 per cent annual increase recorded a year ago, in the first quarter of 2023. 

“While the market remains expensive with rents 15 per cent higher than two years ago,” Urbanation president Shaun Hildebrand said, “renters waiting for some reprieve in the market have found it thanks to a temporary supply infusion from condo investors.” 

Supply from newly completed condos made a significant impact on the rental market, the report said. Over the past four quarters, more than 23,000 new condo units were registered — a 21 per cent rise from the prior year. 

And in the first quarter of 2024, 22,064 purpose-built rental units were under construction — a multidecade high — largely due to the federal government’s removal of GST on new purpose-built rentals. 

It typically takes five years for a condo to be built and with less investment from developers since the Bank of Canada began hiking interest rates in March 2022, there will be fewer new builds coming to market in the coming years, Hildebrand says. 

“Rental supply from condos is set to slowdown for the rest of the year,” he added.

In the first quarter of 2024, there were 12,132 condos completed in the GTHA. For the rest of the year, Urbanation projects an additional 13,261 units — about equal to what was delivered in the first few months of the year.

“So, with supply moderating and demand remaining strong, I don’t see rents declining much further, especially with vacancy remaining low,” Hildebrand says. “We don’t have an official rent forecast for this year, but suffice to say this will be a slower than normal year for rent increases in the GTA.” 

And in a few years around 10,708 new condo units in Toronto have an advertised occupancy date in 2028, Hildebrand said, but “what actually gets delivered that year may be very different. Rents should continue rising as construction falls short of demand.”

In Toronto since mid-2022, 11,595 units over 29 projects have been delayed and confidence in the market weakens, according to Urbanation.

Developers drastically reduced the number of new launches in the first quarter of 2024, with just four projects brought to market.