Flash summary: even though a record number of rentals have come online, courtesy of investors, the rental market still remains vastly undersupplied.
This is a summary of the article published by Urbanation on November 29, 2017, titled: Review: 2017 CMHC Rental Survey, and my main key takeaways:
- The rental market has been tightening as expected. Purpose-built rental vacancy rates are below 1% (a 16 year low) and condo vacancy rates are 0.7% (second lowest on record).
- In 2017, the supply of rental units has decreased 59% from last year, its lowest level in 5 years.
- Low supply paired with high demand is a bad mix. The 2016 census revealed that rental demand has risen to its highest level in 25 years! In addition, home ownership levels have declined for the first time since the 1986-1991 period.
- Purpose-built rental units are not being built as they once were, see below, and the difficult climate brought on by the introduction of the Ontario Fair Housing Act makes condos a far less profitable investment, which could only mean decrease in condo rentals.
- If you think the massive amount of construction in the city will smooth out demand, think again, the percentage of condos that have been converted to rental units has levelled out at ~30% since 2016, which means condos will likely not be able to shoulder the shortage.
- A double-edged sword is the fact that CMHC acknowledged that 48% of condos in 2017 were units are rentals. A staggering number in my opinion, but it still won’t be able to pick up the slack.
Overall, it looks like a very tight rental market, and it appears that it will continue to get tighter even though there is lots of supply coming online.
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