The condo rental market for the third quarter of 2019 is out. Here is the summary of the data:

The vacancy rate for the City of Toronto was 0.7% which is extremely low. The second point is the number of condos listed for sale was up by 35% in the third quarter of 2019 compared to the third quarter of 2018.

Having said that, approximately 12% more condos were rented for the same period compared to 2018 and the rental prices went up between 2.5% to 3.5%. Naturally you would think if supply increased by 35%, prices would drop. Although there was more supply and more transactions from the rentals that took place in the third quarter, because of the extremely strong demand and low vacancy rate (0.7%), rental prices still went up.

This is a very good and manageable increase because it is sustainable. It's very close to inflation, and it's more in line with wage increases across the city. For the downtown core, between DVP, Dufferin, Bloor and the Lake, here's the breakdown of what these condos rented for:

Bachelors rented for an average of 1,900, which is just crazy! One bedrooms rented for 2,300. Two bedrooms for 3,200. Three bedrooms for $4,200 per month. With rent controls scrapped as of November 15th, 2018, we're seeing more developers talking about and proposing purpose-built rentals in the city.

This is good due to the low the vacancy rate and strong demand for people wanting to live in this city to be close to jobs, more supply of housing is needed. Having more supply of rentals hopefully would moderate rent increases which if remains around the inflation range of 2-3%, it's more sustainable over the long term.

On the flip side, if rent prices skyrocket into the double digits where you're into this 10%, 15% or 20% annual appreciation, that is not good. Yes, it might sound attractive from a landlord perspective, but in reality that's a short term gain, because eventually what will happen is tenants will say, "You know what, that's it, I have had enough and can't live in the city. It's too expensive. I will live somewhere else further out”. They will move out to other geographical locations and that potentially for them is the end of working in the city to avoid commuting 2-3 hours a day. They will look for a job outside the city which might lead to companies moving out of the city. This is a longterm possibility, as jobs will have to move to these other locations because the people who want to work in these jobs cannot commute into the city, and the companies will be forced to move outside of the core of Toronto. Real estate prices and rents are driven by jobs and local GDP. If jobs move out, this will create downward pressure on real estate prices and rents.

If you're looking to invest in real estate or contemplating buying an investment property, please feel free to reach out. I'd be more than happy to share with you my investment strategies since 2006.

Until next time, happy investing.