The Toronto rental market has been a hot topic of discussion, with many questioning the affordability and availability of housing in the city. In this blog post, we dive into the data released by the Toronto Regional Real Estate Board for the third quarter of 2023 to understand the current state of the rental market. From soaring rent prices to potential opportunities for real estate investors, we explore the key findings and analyze the implications for tenants and investors alike. Let's delve into the details and uncover whether affordable housing in Toronto is just a myth.

Understanding the Rental Market:

In the third quarter of 2023, the Toronto rental market witnessed significant changes. Bachelor apartment rents increased by 9.2%, reaching a staggering $2,246. One-bedroom apartments saw a 6.1% increase, averaging at $2,633. Meanwhile, two-bedroom units experienced a 7.8% surge, with rents averaging $3,430. The most substantial jump was observed in three-bedroom rentals, which spiked by 14.5% to an average of $4,739. These numbers paint a grim picture for tenants, highlighting the lack of affordability in the city.

Co-living: A Cost-Saving Solution:

One way tenants are coping with the high rental prices is through co-living arrangements. By sharing the cost of three-bedroom rentals, individuals can split the rent three ways, resulting in significant savings. For example, instead of paying $2,633 for a one-bedroom unit, three individuals can co-live in a three-bedroom unit and pay approximately $1,350 each. This presents an enticing option for those looking to save on monthly rental expenses.

Focus on the City of Toronto:

When analyzing the data specific to the City of Toronto, it becomes evident that the majority of rental activity concentrates in Toronto Central. This area encompasses two main sections: C1 (Yonge Street west to Dufferin, Bloor down to the lake) and C8 (Yonge Bloor DVP down to the lake). Toronto Central accounted for approximately 9,000 out of the 13,000 rentals in the city. The rental prices in Toronto Central were even higher compared to the broader GTA, signaling the challenges faced by tenants in the heart of the city.

Opportunities for Real Estate Investors:

While the high rental prices may deter tenants, real estate investors have identified a couple of opportunities within the market. One opportunity lies in owning or purchasing a condo built after November 15th, 2018. These condos are exempt from rent control, allowing investors to increase rents to market value and improve cash flow. This becomes particularly beneficial for investors with variable mortgages that have experienced significant increases in payments over the past year and a half.

Another area of opportunity for real estate investors lies in the freehold market. Though the rental data presented by the Toronto Regional Real Estate Board focuses primarily on condos, the rental income for freehold properties such as semi-detached, detached, and townhomes remains strong. What differentiates these properties from condos is the absence of condo fees, resulting in potential savings for investors. While the purchase price may be higher for freeholds, the attractive rental income can offset the higher borrowing costs.

Conclusion:

The Toronto rental market has reached unprecedented levels of unaffordability, making it challenging for tenants to find suitable housing within their budget. However, opportunities exist for those willing to explore alternative options, such as co-living arrangements, and for real estate investors looking to capitalize on the rental market. As interest rates fluctuate and market conditions evolve, it is essential to navigate the rental market with careful consideration and expert advice. If you are interested in investing in real estate or need assistance with navigating the rental market, please feel free to reach out. Together, we can explore concrete examples and devise strategies that align with your financial goals.