Rentals.ca May 2019 National Rent Report

The average property on Rentals.ca was offered for rent at $1,844 per month in April, a decrease of 1.1% month-over-month. The median asking rent of $1,700 per month is 2.9% lower than March ($1,750). Part of the decline can be attributed to the smaller average unit for lease in April of 945 square feet, down 1.1% from the prior month.

National Overview

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Breaking down the Rentals.ca data by property type shows that single-family units (single-detached and semi-detached) increased by 0.2% month-over-month, while condo apartments increased by 2.0% in April over March to $2,467 per month on average.

Because the majority of listings on Rentals.ca are rental apartments, the decrease in average rents in April ($1,502 to $1,491) resulted in a decline overall.

Because of the small sample size of basement apartments, there is more monthly volatility in the average rental rate.

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When conducting a more apples-to-apples comparison of monthly changes, the chart below looks at the average rent and average unit size for condominium apartments and rental apartments in Canada over the past three months on Rentals.ca.

Studio units were the only suite type to see a monthly increase in average rents in April, rising from $1,232 per month to $1,234 per month. One-bedroom rents declined by 1.8% monthly to $1,662 per month in April from $1,693 per month in March. Two-bedroom units declined by 1.3% monthly.

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Provincial Rental Rates

On a provincial level, Ontario had the highest rental rates in April, with landlords seeking $2,189 per month on average (all property types), an increase of 1.3% from March ($2,162). In British Columbia, the average asking rent was $1,682 per month, an increase of 4.4% month-over-month, the second highest monthly growth among the provinces in April (Manitoba: 5.1%). Asking rents in Alberta have decreased in April by 0.7% from March, while average rents in Nova Scotia dropped by 1.4% monthly.

It should be regularly noted that monthly changes, both up and down don’t necessarily reflect big increases or decreases in demand, but can be the result of changing the composition of units available for rent on a monthly basis. The Rentals.ca data is asking rents only, and landlords often overprice their listings, which can skew data as well.

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Another factor that can influence the rental rate in each province is the share of units by bedroom type. The chart below shows the suite mix breakdown for rental apartment listings on Rentals.ca for six provinces in April (excludes four-bedroom and five-bedroom units).

Quebec has the most studios as a percentage of all listings at 14%, topping Nova Scotia’s 13%. Studio units account for just 3% of listings in Manitoba.

British Columbia and Ontario have the highest share of one-bedroom units at 46% and 41% respectively, while Nova Scotia and Alberta are tops for two-bedroom units at 43% and 42% respectively.

In Manitoba, nearly 23% of rental apartment listings have three bedrooms, compared to just 7% in British Columbia.

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Investors have been purchasing condominiums to lease them out more frequently in recent years, especially in Ontario and British Columbia. The average unit sizes and rent per-square-foot (psf) for condo apartments on average in the two provinces is pretty similar, as shown in the chart below.

Private landlords are asking $3.64 psf on average for one-bedroom units that are 641 square feet on average in Ontario through the first four months of 2019. In BC, landlords are asking $3.46 psf for 647 square-foot units on average. One-bedroom condo units in Quebec lease for less that $2 psf.

Two-bedroom units are slightly larger in Ontario than two-bedroom units in BC, and lease for less on a per-foot basis at $3.07 versus $3.12. Two-bedroom condos in Quebec lease for less than half of those rates.

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Municipal Rental Rates

The chart below shows the average asking rents for condo and rental apartments, as well as the overall average for all property types (singles, townhouses and basement apartments added) for select municipalities in Canada.

The average listing in the (former city of) Toronto was $2,458 per month in April, up from $2,442 in March. The average condo was listed for $2,649 per month in April, up from $2,635 in March.

There are more single-family listings in Toronto than Vancouver, so these larger units pull the average rent up for all property types. However, average rental rates for both condos and rental apartments are higher in Vancouver than Toronto in April. On average, landlords are listing condo apartments for $2,977 per month on Rentals.ca, and rental apartments for $2,199 per month — the condo rent is up month over month, while the rental apartment rent dipped slightly from March.

Tenants looking to rent an apartment in Mississauga will likely pay about $200 less per month than in Toronto for one- and two-bedroom units, when considering the average rental rates.

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When looking at the average rent per-square-foot for apartments with condominium or rental tenure, and plotting that data against the average unit size for several municipalities in Canada, Toronto tops Vancouver with an average rent per-foot of $3.62 psf in April (Vancouver: $3.32 psf). The average unit size in the two top municipalities in Canada are fairly similar with Toronto at 751 square feet and Vancouver at 757 square feet.

On the opposite side of the spectrum is Quebec City; the average rent per-square-foot is just $1.48 psf, with an average unit size of 1,001 square feet.

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One bedroom or two bedrooms? The average tenant would likely prefer a two-bedroom unit over a one-bedroom unit, but because of affordability, they choose the smaller suite. The chart below looks at the condo and rental apartment breakdown by bedroom type for several of the top municipalities in Ontario.

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Nearly 60% of the listings in the former city of York are one-bedroom units, followed by Etobicoke at 56%, and Ottawa at 54%. About 52% of listings in the former city of Toronto are one-bedroom units, but another 8% are studio suites.

The highest share of two bedroom units for lease can be found in Mississauga at 60%, followed by London at 51%.

Edmonton Rental Market

Edmonton is one of the most active municipalities on Rentals.ca, and the chart below maps the average rent by postal code in Edmonton and the change in the average rent over the past six months.

The T6E postal code had the highest average rents in Edmonton in April at $1,472 per month, an increase of 4% over the last six months. Interestingly, every major postal code in Edmonton has seen average rents increase over the past six months.

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Toronto Insights

Following the removal of rent control on new buildings by the federal Progressive Conservative government last year, there has been renewed interest in building purpose-built rental apartments.

Several of the new rental apartments built in Toronto and North York over the past decade experienced extremely quick lease-up periods and rents in excess of nearby condominium apartment projects because of a desire by tenants for more security of tenure and on-site professional management.

The chart below shows the average rental rate by bedroom type at a selection of new and relatively new rental apartment projects in Toronto, North York and York.

The most expensive project is Two St. Thomas by Bentall Kennedy and Kingsett Capital in Yorkville. With an average rent of $3,682 per month, the project is targeted at luxury move-down buyers from the immediate area. Check out their virtual suite tours online.

Alto at 1544 Dundas Street West is in west Toronto in the Little Portugal neighbourhood. Overall, rents in this project average $2,539 a month, with two-bedroom units going for $3,750 per month on average.

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Since late 2018, almost half of the listings in these 17 projects have been one-bedroom units, with about 40% being two-bedroom suites.

The right side of the chart below shows the range and average size of these new units by bedroom type, with studios at 415 square feet, one-bedroom units at 600 square feet, two-bedroom units at 875 square feet, and three-bedroom units at 1,420 square feet.

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Units sizes were not available for all units in these projects, but for a notable portion of units, the rent per-square-foot can be calculated. The chart below shows the average and median rent per-foot by bedroom type at these 17 projects since October 2018.

Studios are commanding $4.20 to $4.40 psf, one-bedroom units are averaging over $3.90 psf, and two-bedroom units are available for just under $3.60 psf. The wide range of unit sizes for three-bedroom units (as shown in the chart above), the average and median rent per-square-foot for these units is wide.

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Conclusion

Rental rates declined for the second straight month in Canada per listing data on Rentals.ca, following sharp monthly increases in late 2018 and early 2019.

The general consensus among economists is that there will be no mortgage rate increase in 2019, which may spur some tenants to jump into the ownership housing market, freeing up units for other prospective tenants and easing upward rent inflation pressures.

In April, there were 14,697 new housing completions in Canada, the highest total of the year, likely adding new rental supply that helped cool rental rates.

A new Supply Action Plan announced by the Conservative government in early May is expected to increase housing supply in Ontario and curb the outsized price and rent growth experienced in the province over the past decade, but several pundits don’t expect the impact on the rental market to be pronounced.

It is more likely that high rent levels will spur new rental development, as the 17 new (and new-ish) purpose-built rental projects have seen their average rent increase from $2,586 per month in January to $2,767 per month in April. Condo quality features and finishes, with security of tenure, has resulted in very strong demand.

Despite the slight softening in market conditions overall, new product has continued to be popular with tenants in Canada.

Rentals.ca Data

The data used in this analysis is based on monthly listings from Rentals.ca. The data is much different than the more familiar numbers collected and published by Canada Mortgage Housing Corporation (CMHC).

Rentals.ca data includes basement apartments, rental apartments, condominium apartments, townhouses, semi-detached houses and single-detached houses, where CMHC’s primary rental data only includes rental apartments and rental townhouses. CMHC does collect some data on the secondary market, but it is reported separately.

The CMHC rental rates are based on the entire universe of purpose-built rental units in Canada (the stock), while Rentals.ca data is primarily based on the asking rents of vacated units only (the flow) — this is more representative of the actual market rent a prospective tenant encounters. The Rentals.ca data set typically produces much higher rental rates in comparison to CMHC, as vacated units are not subject to rent control.

The average and median rental rates via Rentals.ca can also skew higher than CMHC’s data for several reasons: The inclusion of larger and more expensive unit types like singles, row units and condos; the survivorship bias (overpriced units remain in the sample longer); and the multiple listings of the same property at different rent levels every month.

It should also be noted that properties listed for above $5,000 a month and below $500 a month are eliminated from the sample of units analyzed. Also, short term leases, single-room rentals, and furnished rental units are eliminated from the sample where identifiable.

 

 

 

Ben Myers

Ben is the President of Bullpen Research & Consulting Inc., a boutique residential real estate advisory firm. With over 15 years of real estate research experience in both the United States and Canada, Ben has acquired extensive knowledge on land values, new home prices and rental rates, and macro-level housing trends. Ben has held several positions in Toronto, including urban economist at Altus Clayton, and Executive Vice President at condominium apartment data tracking firm Urbanation Inc. Ben has previously been the keynote speaker at ULI and PWC’s flagship Emerging Trends Conference.