To understand what the Greater Toronto Area’s rental market will look like in the year to come, it’s worth reflecting on the last few months of 2023.
Robert Van Rhijn, Broker of Record at Strata Realty, tells STOREYS that there was a 75% spike in rental condo inventory between September and December. In the freehold market, rental inventory surged 53% over those same months.
“So now, not surprisingly, renters are having a lot more success securing the first property they put an offer on rather than the third or the fourth, which was fairly common for much of last year when there was a lot of competition,” Van Rhijn says.
“I mean, renters are having a great time in this market. Landlords on the other hand, it’s definitely a tough pill to swallow. And anecdotally, what I’m hearing from my team is that landlords are still kind of of the mind that they dominate this market and are firmly in the driver’s seat. And that’s just not the case right now.”
But the proof is in the pudding. Inventory is surging and properties are sitting on the market for an average of 28 days (compared to around 12.6 days back in August, according to data provided by Strata), leaving renters spoiled for choice. Meanwhile, rent growth has been slowing down for months now. According to the latest figures from Rentals.ca and Urbanation, average rent across the Toronto area came in at $2,913 in November, which is 2.4% under last November’s level.
“Right now, on average, for condos and houses, renters are paying about 1% below the list price,” Van Rhijn adds. “I was just talking to one agent this morning who was saying, routinely, two bedrooms are renting $500 to $600 off the ask price. He said a client of his just put in an offer in on a $3,800 two-bedroom in King West and just secured it for $3,300.”
It’s not just new or turning-over tenants who are reaping the benefit of slower market conditions. Van Rhijn says that today’s renters seem to be much more inclined to dispute an N1 (a notice of a rent increase) served by their landlords.
“There’s been this perception for years that, like clockwork, every year, your landlord is going to serve you a rent increase notice. You’ll get your 90 days notice and then your rent is going to go up. But now that tenants are seeing a notable decline in rental values, they’re certainly giving their landlords pushback in that respect,” he says. “Because tenants have options, they can move to a cheaper property.”
Though Toronto’s market seems to be tipping in favour of renters at the moment, it’s hard to say how long these cooler conditions will last. Economists are forecasting an interest rate cut as soon as the spring, which Van Rhijn warns would influence the market in one way or another.
“On one hand, that would increase buying power, which means many of these sellers who are testing the waters in the rental market are just going to sell their properties. That would take desperately needed rental inventory out of the rental pool,” he says.
“But the other force at play is that there is always a significant faction of renters who want to be buyers; they don’t have any interest in paying down someone else’s mortgage, they want to pay down their own mortgage. And when interest rates come down, you’re going to see more and more people getting approved for mortgages and realizing, you know, ‘I don’t have to rent.’ So that’s also going to reduce the demand for rentals.”
Bearing those outcomes in mind, Van Rhijn reckons that the GTA’s rental market will move into a more balanced territory this spring, before ultimately returning to a “hot landlord market” over the summer as students return for the school year.
“So any renters that feel they’re paying a little too much or want to find something for the same rate they’re paying now, but that gives them a little more space, now’s the time to move or negotiate with your landlord,” he says.