LACKIE: Tough times for Toronto rental market

Every day, without fail, someone will ask me, “So, how’s the real estate market these days?”

The fascination is real, and I get it. Toronto real estate in the time of COVID-19 is somehow exactly as you’d expect while simultaneously defying all conceivable expectations.

It’s a very Toronto kind of thing.

Since March 2020, the city has seen house prices that defy anything we could have imagined in the early days of the pandemic, due in large part to the seemingly eternal Toronto problem of limited inventory coupled with an insatiable demand from deep-pocketed buyers buoyed by low-interest rates.

We’ve witnessed an “urban exodus” that has driven outer suburban and rural markets to frenzied levels, raising concerns about shrinking affordability as supply simply can’t keep up with buyer appetites.

The resale condo market has taken a beating as inventors attempted to off-load units they were no longer able to carry through short-term rentals, therein essentially flooding the market with the inventory at the same time as demand all but evaporated.

But what about Toronto’s rental market? The very same rental market has historically been besieged by slow turnover, low inventory and increasingly unaffordable rents. Less than a year ago, bidding wars for downtown condo leases were common and the vacancy rate was the lowest in the country. No more.

That all changed with the arrival of the pandemic.

Almost immediately following the declaration of the provincial state of emergency, tenants disappeared and demand dropped off.

Universities closed, tourism stopped, service workers faced furlough and layoffs, and immigration ground to a halt. The job market, particularly within the blooming tech sector, a source of pressure on the rental housing market, seized up.

Many, now unable to afford their rent, had no choice but to move back into their parents’ home. Still others, previously attracted to Toronto for the lifestyle rather than the spacious digs, found the prospect of working from home through an indefinite lockdown unpleasant and decided their dollars would stretch further out of town. More space, less overhead, less density — a winning combination.

Alongside decreased demand for rentals, supply surged. In addition to the investor-owned units that had lost their tenants and would not be able to carry themselves on the short-term rental market, the spring and summer also saw a significant number of new construction projects now come to completion. Whereas the plan may have been to sell prior to occupancy, with the resale condo market softening, many investors instead decided to hold off on selling, adding even more inventory to the mix.

Brynn Lackie (2021) “LACKIE: Tough times for Toronto rental market” Retrieved from https://torontosun.com/opinion/columnists/lackie-toronto-real-estate-defying-all-conceivable-expectations-amid-pandemic

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