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Toronto Market Drivers


Toronto is the financial and economic capital of Canada, home to the head office locations of some of the nation’s largest banks, pension funds, hedge funds, and life insurance companies. In 2016, Toronto’s population growth led the nation in both absolute and relative terms, growing by 1.8%. According to the Conference Board of Canada, Toronto’s real GDP is expected to expand by 3.4% in 2016 and 2.6% in 2017, making it one of the fastest growing metropolitan economies in Canada, behind only Vancouver. Toronto’s economic growth in 2016 had a strong positive impact on the labour market, with the unemployment rate falling 2% to 6.8%.

Rental Market2

Robust rental demand for residential units far outpaced supply in 2016 causing residential rents across the GTA to soar 11.7% to $2.77 per square foot. The annual number of new units?? – CHECK leases fell 2% in 2016 from 2015, as the supply of new units was constrained by construction delays throughout the GTA. On the demand side, affordability is creating a significant barrier to the homeownership market, causing the residential vacancy rate to fall to just 1.3%. A low turnover rate of 15.9% also suggests more people are staying in the residential rental market as an alternative to homeownership. Additionally, the average days on the market declined by one week to just 13 days in Q4-2016 compared to Q4-2015. Despite Toronto’s hot residential rental market, the city remains relatively affordable as compared to other large diversified North America cities, with the average two-bedroom rent requiring less than one-third of median household incomes.

5 Reasons to Invest in Toronto Multi-Family Residential Rental Development

  1. Housing’s growing unaffordability is increasing rental demand. Strong demand for real estate coupled with restricted land supply throughout the Greater Toronto Area (“GTA”) has resulted in rising concerns around housing affordability. In fact, the average single family home in the GTA reached $785,500 in July 2016 with no signs of cooling in the near future.3 Continued affordability concerns will provide strong rental demand as many households simply cannot afford the rapidly rising ownership costs.
  2. Demand is outpacing supply. While affordability concerns are fueling rental demand throughout the GTA, the market is struggling to keep pace with the supply of new rental units. CMHC expects housing starts to be in the range of 39,500 to 43,500 in 2016, slightly above the average household formation of about 37,000 recorded between the 2006 and 2011 Census.4
  3. Vacancy rates are at all-time lows. Toronto’s vacancy rate is amongst the lowest of all North American cities. For the past five years, the vacancy rate throughout the GTA has hovered around 1.6% and is 1.3% as of Q4 2016, a trend that is expected to continue in the future as more Toronto continues to attract significant inflows of people.
  4. Job prospects for the typical renter age cohort (20-35) continue to improve. Toronto’s unemployment rate fell 2% in 2016 to 6.8%, with the quality of jobs improving as full-time jobs gain a greater share. This is welcome news from the 20-35 age cohort, who have a higher propensity to rent and have typically struggled to find meaningful full-time work following the global financial crisis of 2008.
  5. A rise in the interest rate could further fuel rental demand. While the Bank of Canada’s key overnight rate has been at 1.0% or less since 2009, interest rates will inevitably rise as the economic cycle evolves. A resultant rise in mortgage rates would increase ownership costs, pushing homeownership further out of reach for many households. Such a scenario would put additional downward pressure on Toronto’s already low residential vacancy rate.

Why Toronto Multifamily?

The Greater Toronto Area (GTA) offers real estate investors some of the best multifamily fundamentals in the world. Housing affordability issues combined with strong population and job growth are creating widespread rental demand. On the supply side, a lack of available inventory has pushed the average days on the market to a low of just 12 days. With the introduction of stricter mortgage rules by the federal government creating an additional barrier to homeownership, Toronto multifamily assets are poised to continue to perform.

Income Required to Purchace Average Price Condo Apartment*

Greater Toronto Area: Q3 2011 to Q3 2016

*Based on five-year mortgage rates, 10% down payment, and maximum GDS ratio of 39%
Source: Urbanation Inc., TREB/MLS, Statistics Canada

In the last five years, the income required to purchase an average priced condo apartment increased by 45%. An astounding $86,116 is now required to purchase the average condo in Toronto. This compares to a median total household income of $75,270. While condos are typically seen as an entry point into the homeownership market, significant price appreciation coupled with new stricter mortgage rules will push many potential first-time homebuyers out of homeownership and into the rental market.

The average rental unit spent just 12 days on the market

Demand is drastically outstripping supply in the Toronto rental universe. The average days on the market dropped over a week from 2015 to 2016. The ratio of leases-to-listings reached a record 89% in Q3 2016. Further, nearly one-quarter of all units leased in Q3 2016 rented for higher than listed.

Average Days on Market

Average Days on Market

Source: Urbanation Inc.

Between Q3-2015 and Q3-2016 average rents grew 8.8% in the GTA

Annual Growth in Average Condo Apartment Rents PSF
Greater Toronto Area: Q1-2011 to Q3-2016

Source: Urbanation Inc.


The ratio of leases-to-listings reached a record 89% in Q3-2016


New jobs created throughout the GTA in the past year


Of units leased for higher than listing price in Q3-2016

Toronto’s most expensive submarkets

Average Rent PSF in Q4-2016

Source: Urbanation Inc.

1 Source: Statistics Canada, Conference Board of Canada
2 Source: CMHC, Urbanation Inc.
3 The Canadian Real Estate Association
4 “Housing Market Outlook – Greater Toronto Area”, CMHC