If you’re looking to rent in Toronto, 2019 is poised to be a challenging year.
Many experts see Canada’s once red-hot housing markets remaining fairly balanced over the next 12 months as average prices and sales moderate, but they are sounding the alarm on one of the country’s tightest rental markets.
“The rental market in Toronto is definitely something to watch in 2019,” Scott Ingram, a realtor with Century 21, told BNN Bloomberg in an email, pointing to the latest rental market report from the Canada Housing and Mortgage Corporation (CMHC), which revealed that a slowing tenant turnover rate coupled with a growing population will further strain the market in the coming year.
According to the CMHC, Toronto has one of the lowest rental vacancy rates in the country at 1.1 per cent. Other hot rental markets like Vancouver and Victoria are seeing similar trends with vacancy rates at 1.0 per cent and 1.2 per cent, respectively.
In comparison, the housing agency said the average vacancy rate across the entire country was 2.4 per cent this year, down from three per cent in 2017 as demand outpaces supply.
Lauren Haw, the chief executive officer of Zoocasa, said Toronto’s burgeoning tech scene will be a major factor adding pressure to the city’s already-tight rental market in 2019.
“There’s a lot of tech-related growth – these are well-paying jobs,” she told BNN Bloomberg in a telephone interview, referring to companies like Instacart and Uber, which both plan to add more jobs to the city, and Pinterest, which opened a new Toronto office in October.
“The people that are migrating here for these jobs [are] affecting not only the purchase market, but obviously also the rental market. So really, the average earner in Toronto is not buying the average house in Toronto. They are either renting or commuting a little bit further to be able to afford the home that they want.”
“The job market will continue to put pressure on the rental housing market – but that job market is actually going to continue to fuel potential buyers into the Toronto [region],” Haw added.
John Pasalis, president of Realosophy Realty, told BNN Bloomberg the dependence of condos in Toronto is what’s most concerning to him.
“I think one of the worst things we’ve seen over the last 20 years is virtually all of the rental supply has come in the form of condominiums, which is not good, because that’s not a permanent rental stock,” he said in a telephone interview.
“I think especially if you’re looking in the downtown core, renting isn’t necessarily a very attractive alternative to buying because it’s also expensive, especially if you’re looking into renting a condo,” he added.
Toronto has one of the most expensive rental rates in the country. In October, average monthly rent for a two-bedroom apartment in the city was $1,467, which was only slightly lower than Vancouver, the country’s most expensive city to rent in, where the average two-bedroom unit goes for $1,649.
Adding to price pressures, Pasalis said that while there is more purpose-built rental construction happening, it’s not enough to keep up with the demand. “I definitely see we are still going to have a very tight rental market in the GTA over the next year.”
Haw echoed that sentiment, noting 2019 isn’t expected to be a big year for condo completions.
“It’s incredibly tight – there just isn’t supply,” she said.
So is 2019 the year to buy a home?
Canada’s housing market is expected to remain balanced in the coming year, as the effects from various government policies aimed at cooling prices – such as Ontario’ Fair Housing Plan in April 2017 and stricter mortgage lending rules introduced by The Office of the Superintendent of Financial Institutions (OSFI) in January – are still having an impact.
Below, experts weigh in on whether 2019 is a good year to buy a home in Canada as the prospect of rising interest rates weighs on potential buyers.
“Definitely there’s some vulnerabilities in the market over the next year or two with rates rising. But if you’re buying for 5-plus, 10 years, my instinct is certainly [buy]. I’d be probably buying a home. I think for homebuyers, the key is that you don’t overspend and you can afford your home if rates do rise three or four years down the road.” – John Pasalis
“In my opinion, trying to ‘time the market’ is risky. If you have a long-term horizon for your purchase, and the current numbers make sense for you, I see nothing catastrophic on the horizon that should stop you from immediately enjoying the qualitative benefits of home ownership.” – Scott Ingram
“I think 2019 is going to continue to be a very balanced market in the purchase and sales market. … I do not see that prices are going to rise sharply. However, even if prices stay flat, if interest rates are going up, the same house will become more expensive for you over time. I don’t think it’s going to be at such a rate that buyers should rush out and buy the next thing that they see – there doesn’t need to be that urgency there. So I always think it’s important to take a measured approach when you’re going to invest in real estate.” – Lauren Haw