{"id":194926,"date":"2025-04-20T15:44:32","date_gmt":"2025-04-20T15:44:32","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/how-is-the-downtown-rental-market-2\/"},"modified":"2025-04-20T15:44:32","modified_gmt":"2025-04-20T15:44:32","slug":"how-is-the-downtown-rental-market-2","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=194926","title":{"rendered":"How Is The Downtown Rental Market?"},"content":{"rendered":"


\n<\/p>\n

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Here\u2019s a story for you\u2026<\/p>\n

I have a rental listing on the market for $9,000 per month.<\/p>\n

It\u2019s in the \u201cluxury\u201d category, and with that, if I may be so bold, comes an extra layer of\u00a0choosiness<\/em> on the part of the landlord.<\/p>\n

I mean,\u00a0every<\/em> landlord out there is choosy, as they should be.\u00a0 We\u2019ve discussed the state of the rental market in Ontario at great length over the last few years, especially as it pertains to the impossible task of removing a problem tenant, securing unpaid rent, and using the Landlord & Tenant Board to\u00a0legally\u00a0<\/em>evict a tenant and for\u00a0cause,\u00a0<\/em>so it should come as no surprise that landlords are being more choosy (diligent?) than ever.<\/p>\n

When it comes to a $9,000 per month rental, however, I would argue that there are fewer scam operators knocking on the door.\u00a0 I\u00a0did<\/em> uncover one scam a few years ago for a $12,000 per month furnished luxury rental downtown, but overall, I\u2019d say that scammers stick to the lower price point where there\u2019s more volume and where the calibre of agents and landlords is poor.<\/p>\n

I received an offer on the condo last week for $8,900 per month.<\/p>\n

The tenants were a family and they were very qualified, albeit perhaps missing some essential documents like a credit report (haven\u2019t been in Canada long enough), and only one was employed, but they had substantial financial resources and offered to pay eight months of rent up front.<\/p>\n

But that $8,900 offer on a $9,000 per month listing was really curious to me.<\/p>\n

I called their agent and asked, \u201cWhy would they offer $8,900 per month on a $9,000 per month rental when they\u2019re providing eight months of rent up front?\u201d<\/p>\n

The agent said, \u201cBecause they want a deal.\u201d<\/p>\n

I thought she was kidding.\u00a0 So I waited for a follow-up comment, but nothing came.<\/p>\n

I said, \u201cAre you serious?\u201d<\/p>\n

She said, \u201cYes, they want a deal.\u00a0 They want to feel good about their decision.\u201d<\/p>\n

$100.<\/p>\n

How\u00a0good<\/em> does that make a person feel?<\/p>\n

Their decision to provide eight months of rent up front, instead of the traditional\u00a0two<\/em>, means an extra $53,400.<\/p>\n

So why do they care about $100 per month?<\/p>\n

I told her, \u201cWith respect, I think that\u2019s a really odd move.\u00a0 You\u2019re giving us eight months of rent up front.\u00a0 Why wouldn\u2019t they just make this easy?\u201d<\/p>\n

Again, she said, \u201cBecause they want a good deal!\u201d<\/p>\n

I presented the offer to my landlord client and he too raised an issue with this.<\/p>\n

It was like we were both staring at one of those 3D puzzles that were all the rage in the late 1990\u2019s, and we just couldn\u2019t get our eyes to focus in a way that would allow us to see properly.<\/p>\n

Amazingly, my landlord client said, \u201cI don\u2019t get a good feeling from these people.\u00a0 There\u2019s something off about this.\u00a0 I\u2019ve got a very good track record of sussing out the squeaky-wheel tenants, problem tenants, and people who just drive ya nuts, so I\u2019m going to pass<\/em>.\u201d<\/p>\n

So he passed.<\/p>\n

And when I told the agent on the other side, she simply said, \u201cThank you for letting me know!\u201d and that was that.<\/p>\n

What was a stranger occurrence:<\/p>\n

a) The landlord\u2019s decision not to proceed with an offer $100 under the posted list price
b) The tenancy agent\u2019s decision not to try<\/em> to revive the offer, resubmit, or get back on side?<\/p>\n

I suppose you could point to the decision to offer $100 under list to begin with, but overall, this was a really odd experience.<\/p>\n

There are agents out there right now saying that the rental market is hot and others are saying that it\u2019s slow as hell.\u00a0 I suppose it depends on the day and who you ask.<\/p>\n

But it also depends on the building and the level of competition!<\/p>\n

Imagine you\u2019re trying to rent your 2-bedroom, 1-bathroom condo in a building where there are a slew of units for lease.<\/p>\n

But now imagine that, in addition to competing to other 2-bedroom units, you\u2019re competing specifically against\u00a0your exact same model unit\u00a0<\/em>five times over.<\/p>\n

That\u2019s exactly what\u2019s happening with the \u201c11\u201d model unit here:<\/p>\n

\"\"<\/p>\n

6th floor, 7th floor, 8th floor\u2026<\/p>\n

\u202617th floor, 21st floor, 26th floor.<\/p>\n

And what\u2019s with the\u00a0pricing<\/em>?\u00a0 It\u2019s all over the map!<\/p>\n

There are countless other examples of this throughout the downtown core and the buildings that are new and\/or just registered are the hardest hit.<\/p>\n

The last time we looked at the rental data, it was the first week of January and we were looking back at 2024\u2019s fourth quarter.<\/p>\n

Oh, January.<\/p>\n

It was a different time!\u00a0 Three months ago, sure, but didn\u2019t the world have an entirely different feel?<\/p>\n

In any event, with Q1 now behind us, let\u2019s take an updated look at the downtown condo rental market.<\/p>\n

Through three months, the inventory levels are somewhat on par with 2024:<\/p>\n

\"\"<\/p>\n

While I don\u2019t think going from 2% to -1% to 8% is necessarily a\u00a0trend<\/em>, I do have a theory on this\u2026<\/p>\n

What if all the would-be condominium sellers who listed their properties for sale in January and February, only to find out that the market was weak, decided to\u00a0keep<\/em> the condos for another year or two and post them for lease?<\/p>\n

What if\u00a0that<\/em> explains the increase in inventory in March?<\/p>\n

Maybe I\u2019m making something out of nothing.\u00a0 It\u2019s only 8%, after all.<\/p>\n

But if we see a surge in April and May, then my theory will prove correct.<\/p>\n

Let\u2019s look at the above data in our chart, and you tell me if it provides you with a slightly different perspective:<\/p>\n

\"\"<\/p>\n

Do you see it?<\/p>\n

Inventory levels in January and February were on par with 2024 and 2021, but in March, we hit a new \u201chigh.\u201d<\/p>\n

Is\u00a0that<\/em> the start of a new trend?<\/p>\n

From the graph, it sure looks like it\u2026<\/p>\n

As for condos\u00a0leased<\/em>, here\u2019s a data set that speaks to\u00a0strength<\/em> in the rental market:<\/p>\n

\"\"<\/p>\n

That\u2019s significant.\u00a0 No question.<\/p>\n

No matter what \u201cstories\u201d you\u2019re hearing out there about the rental market, double-digit year-over-year increases in\u00a0all three months<\/em> speaks to market strength.<\/p>\n

Our chart confirms this:<\/p>\n

\"\"<\/p>\n

That\u2019s what I would call \u201cin the healthy range.\u201d<\/p>\n

Leases are plummeting.\u00a0 People still need a place to live.<\/p>\n

But leases aren\u2019t\u00a0skyrocketing<\/em> either, as there\u2019s no sign of a major shift in how or where we live.<\/p>\n

Now, how this all ties together is via the ratio of condos leased<\/em> to condos\u00a0listed,\u00a0<\/em>ie. our absorption rate:<\/p>\n

\"\"<\/p>\n

Theoretically, an increasing absorption rate should lead to an increase in rent prices.<\/p>\n

In practice, however, rent prices are\u00a0down<\/em> year-over-year.<\/p>\n

According to Rentals.ca<\/a>, the average rental price in Toronto declined by\u00a06.8%<\/strong> in 2024.<\/p>\n

If you want to get more specific, here are are the rental stats for March:<\/p>\n

1-Bedroom:<\/span>
Down 2.0%, month-over-month
Down 6.4%, year-over-year<\/p>\n

2-Bedroom:<\/span>
Down 4.5%, month-over-month
Down 9.8%, year-over-year<\/p>\n

What does our chart of absorption rate tell us?<\/p>\n

\"\"<\/p>\n

To describe it in a single word:\u00a0meh<\/em>.<\/p>\n

Or to use a turn of phrase:\u00a0par for the course<\/em>.<\/p>\n

These are pretty unremarkable statistics at a time when everything\u00a0else<\/em> seems extraordinary.\u00a0 You can\u2019t expect less than an 800-point swing up or down on the DOW Jones these days, and the news cycle gives us hyperbole after fake news after doomsday scenario.<\/p>\n

Not that we\u2019re complaining, of course.<\/p>\n

Sometimes, relaxed, modest, and calm is a welcome change.<\/p>\n

Have a wonderful Easter weekend, everybody!<\/p>\n