How the rental market became Toronto’s latest housing nightmare

Bidding wars are now commonplace in a city where rents have soared 20% in a year

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Shivin Kaul and his three friends have been looking for a house to rent in Toronto since July. The group of young professionals found several that fit their needs, the only problem is that they keep outbidding – three times in a single week, at some point.

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“(We’re) tired of seeing about 10 houses, liking a few, and then losing the ones you like to someone who outbids them $300 or $400,” Kaul said, explaining that he and his friends had started outbidding ads in a bid to secure a place they could move into by September.

Last week, Kaul’s group told a landlord he would be willing to pay $4,000 for a three-bedroom house that costs $3,600 plus utilities per month after being asked for his “best deal”. “. The rental ended up going to someone who offered another $100.

The bidding for rents is not new, but it has become more common with the current hot market, in which rents have jumped by more than 20% in some cases since this time last year.

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Conrad Rygier, a Toronto-based real estate broker with Right At Home Realty, said over the past month he’s seen outbids for rental properties “at least 90% of the time.”

Owners are super, super picky about who they accept because it’s a landlords market

Conrad Rygier, a Toronto real estate broker

Market watchers like Rygier say that with interest rates rising, many Canadians who planned to buy homes are now thinking twice about market uncertainty or realizing they can’t. afford to buy and return to flood the rental market. This surge in demand has caused “absolute havoc” on the rental market, Rygier said.

“What I’ve seen in 14 years of work, these past few months have been the worst and craziest (times) to represent a tenant,” said the broker, who works with both tenants and landlords. “It was great for landlords, horrible for tenants.”

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Rygier called this a “frustrating time” for tenants, who are forced to take risks submitting photo-based offers – without even seeing the property in person – as many are rented the same day they list. Often they compete with several different bids for the same good.

“The landlords are super, super picky about who they accept because it’s a landlord’s market,” he said, adding that he represented “great tenants” who were turned down because the landlord was looking for “something else”.

Investors were also beginning to flee the condo market due to higher interest rates and the potential for negative cash flow.
Investors were also beginning to flee the condo market due to higher interest rates and the potential for negative cash flow. Photo by REUTERS/Carlos Osorio

Often that means renters with six-figure incomes and spotless credit scores, leaving those with less than perfect credit and even high five-figure incomes — not to mention those with pets — left in the lurch. ’embarrassment.

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Difficult landlords aren’t the only obstacle tenants face: they also have to pay rent.

Prices seem to go up every month

Karen Yolevski, Chief Operating Officer of Royal LePage Canada

Average rents for one- and two-bedroom apartments in Toronto are now at record highs, while average condominium rents are rising double-digit annually for all room types, according to recent rental market data released by the Toronto Regional Real Estate Board (TRREB). Meanwhile, rental listings on the council’s MLS system have fallen nearly 30% year-over-year, giving tenants fewer choices.

Those looking to rent a studio or one-bedroom apartment in the Greater Toronto Area must pay at least 20% more than a year ago. The TRREB report found rent for studios now averages $1,829, down from $1,462 a year ago, while one-bedroom apartments average $2,269, down from $1,887 $. This rate of increase surpassed the previous peak in the third quarter of 2019.

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Agents at Royal LePage Real Estate Services, which is owned by Bridgemarq Real Estate Services Inc., have also seen the rental market tighten, chief operating officer Karen Yolevski said in an interview.

“Prices seem to be going up every month,” Yolevski said.

She added that the company’s listing calculations show an increase of more than $400 per month in Toronto rental prices on all property types this year — not far off the real estate board’s numbers in June.

Yolevski said there are more renters than properties on the market. She attributed the surge in demand to the number of people returning to major urban centers as they return to work in the office, as well as the rebound in immigrant numbers after tight COVID-19 restrictions.

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As demand increases, there seems to be little hope that supply will fill the void.

Urbanation found that of approximately 35,000 new condo units set to launch in the GTA this year, at least 10,000 units will be shelved instead.
Urbanation found that of approximately 35,000 new condo units set to launch in the GTA this year, at least 10,000 units will be shelved instead. Photo by Postmedia

A recent CIBC Capital Markets report, citing data from real estate market research firm Urbanation Inc., found that project delays and cancellations amid rapidly rising interest rates, rising construction costs and lack of available labor actually reduced the pipeline of potential candidates. units.

Urbanation found that of approximately 35,000 new condo units set to launch in the GTA this year, at least 10,000 units will be shelved instead.

“So when the fog clears, units that were due to be built now will no longer be available – making even a tight rental market.
tighter,” Benjamin Tal, CIBC’s deputy chief economist, wrote in the report. “And that’s the opposite direction to where we should be heading.”

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In an interview, Tal said investors were also starting to avoid the market due to higher interest rates and the potential for negative cash flow. Declines in the number of investors can limit or even eliminate the supply of new rental units, especially in markets like Vancouver and Toronto, where about half of new condo sales go to investors who then rent those units, did he declare.

“I think rent inflation will continue to be a major factor,” Tal said.

With rent control in provinces like Ontario tied to inflation rates, Tal said central bank efforts to control inflation will be “extremely important” to keep the rental market from becoming less affordable.

For many renters, like Kaul, buying a house instead of renting it would be better if it wasn’t so out of reach. For now, they will have to compete in the tight rental market until they are able to save enough to buy.

“I don’t see myself buying a house for the next seven or eight years given the rising prices,” Kaul said. “Just trying to rent a house is all of our goal.”

• Email: dpaglinawan@postmedia.com | Twitter:

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