FOR IMMEDIATE RELEASE
ATTENTION: News; Financial; Real Estate Media
RENTAL CONDOMINIUM MARKET HOTTER IN 2012 THAN 2011
More Rental Activity and Higher LLR in each 2012 Quarter in Comparison to the Equivalent Quarter in 2011
TORONTO – February 8, 2013: Urbanation Inc., the leading source of information and analysis on the Toronto condominium market since 1981, today released summary results of its Q4-2012 UrbanRental report.
There were more registered unfurnished condominium apartment units leased through the Toronto Real Estate Board (TREB) in 2012 than resold (15,355 vs 15,292), as demand for investor-held private rental suites remains very strong.
In Q4-2012, there were 3,292 rental transactions in the Toronto CMA, an increase of 13% year-over-year from 2,902 in Q4-2011. Index rents increased 3.2% annually in the CMA to $2.29 psf (Average: $1,836 per month for 803 sf).
While listings in the resale condominium market declined annually in Q4-2012 (-4%), rental condominium listings increased 11%. Despite the jump in supply, the Lease-to-Listings Ratio (LLR) increased year-over-year from 64.8% in Q4-2011 to 66.5% in Q4-2012.
"An LLR above 50% would likely be considered a landlord's market, anything below 40% a renter's market, and anything in between being a balanced market" says Ben Myers, Urbanation Executive Vice President. "So to put the 66.5% LLR in perspective, a further 3,500 listings would be required to drop the market into renter's market territory!"
Approximately 15% to 20% of units in completed buildings come up for lease in the quarter the project registers, therefore for the market to see 3,500 more listings, approximately 18,000 more units would have needed to register in Q4-2012 (more than the past five quarters combined)!
Myers adds, "the rental condominium market remains under supplied, and even if record condominium completions are realized in 2013, Urbanation expects the rental market to remains strong for at least the next 15 to 18 months".
Urbanation is Canada’s leading condominium market research company. Since 1981, Urbanation has analyzed the Toronto condominium market, publishing the “industry bible” – Urbanation’s Condominium Market Survey. This quarterly report tracks new, resale and future condominium projects. The newest report from Urbanation is UrbanRental, which tracks activity in the condominium rental market. Urbanation also provides the development community with essential consulting services, which include site and topic specific market studies and surveys.
Rent to Resale Update
At Urbanation we do not believe "magic bullet" forecasting models like the rent-to-resale ratio really tell you if a market is overvalued, headed for a decline, or is getting more or less affordable. To think a market as complicated and dynamic as the Canadian Real Estate market could be boiled down to two variables is absurd. Comparisons of these types ignore location, product type, unit age, unit size, unit upkeep, maintenance, taxes, interest rates, mortgage insurance rates, the political environment, etc, etc, etc. Read more about it here: March 2012
Now that we have a better time series from collecting data from our UrbanRental Report we wanted to compare resale index pricing and index rents to see if the Toronto Condominium Market is becoming more un-affordable or not. We took the average resale index price in 46 submarkets across the Toronto CMA and divided that figure by the average index rent in that submarket in each of the last eight quarters to get a price multiplier by submarket. We took an average and a median of the 46 submarkets for each quarter since 2011 to derive the two lines in the figure below. Our model controls for product type, location and size.
If you look at the green median trendline, there has essentially been no change in "affordability", if you look at the blue average trendline, the Toronto CMA condominium apartment market has got more affordable since 2011!