Toronto landlords dish out incentives as rental markets cool
The Toronto rental housing market has pulled a 180.
Before the pandemic, Canada’s largest city was characterized by a rush of renters competing for places to call home. But the tables have turned as a result of a pandemic that’s upending conventional wisdom about the way we live.
Crystal Chen, an analyst with rental-market tracker PadMapper, says landlords are now offering a slew of incentives.
“I’ve seen two months of free rent with at least a year-long lease as well as things like six months of free parking or storage,” she said in a phone interview.
A search of rentals.ca reveals an ad for a bachelor apartment near Ryerson University offering free rent for the rest of 2020. The building boasts amenities such as an “indoor penthouse pool” and “state of the art exercise room.” A listing in Toronto’s Annex neighbourhood entices with one month of free rent and free internet for students who sign a lease in October.
Filomena Morra is the property manager for Howard Properties, which is advertising a $500 move-in bonus for units in a high-rise on Eglinton Ave East in midtown Toronto.
"We started offering it at the end of August because we noticed that traffic in the building had slowed down. We didn’t have as many showings as we typically would this time of year," she said on the phone.
A confluence of events has created this renters’ market. Because schools are offering virtual courses, many students are staying with family or choosing less expensive places to live. With international tourism decimated, short-term rentals formerly offered as Airbnb-style vacation spots have flooded the market.
Meanwhile, immigration continues to be at a virtual standstill and demand from newcomers for units in Toronto is significantly lower. And the pandemic trend of working remotely has allowed many to choose more affordable homes outside the city, where space is more abundant.
While rents in Toronto have, on average, come down significantly during the coronavirus crisis, demand and prices in surrounding cities such as Hamilton, Kitchener, and Guelph have increased, reflecting the exodus from the core.
“There’s even this phenomenon of people moving from Hamilton to St. Catharines,” according to Paul Danison, a spokesperson for real estate platform rentals.ca. “People are saying, ‘I can work from home and I want a bigger house, for less money, more square footage, an office, more green grass for the kids to play.’”
According to research firm Urbanation, vacancy rates for unfurnished condo apartments in the Greater Toronto Area rose to 2.4 per cent in the third quarter, which marks the first time they’ve been above two per cent since Urbanation began tracking data. Rental units are sitting on the market longer, on average 26 days in August compared with 14 the previous year.
The latest report on rentals.ca’s listings shows that within the condo segment the deepest discounting is offered on the smallest units of about 400 square feet. Meanwhile, rents on units larger than 1,000 square feet have actually increased slightly during the pandemic. Danison says this reflects a shift in demand for more space as tenants seek units with room for a workout space and home office.
According to Statistics Canada, 4.2 million people in Canada worked from home in September, or approximately one out of every four workers. That’s significantly more than the pre-pandemic average of 1.9 million remote workers across the country.
And with international travel heavily restricted and few tourists coming to Toronto, units that were previously offered to vacationers as an alternative to a hotel have contributed to the swelling rental housing supply.
According to PadMapper analysis for BNN Bloomberg, the number of short-term listings (leases that are less than seven months) in Toronto surged 104 per cent year-over-year during the third quarter. The number of long-term listings has increased 47 per cent during that timeframe. Chen says this signals the flood of Airbnb type rentals, usually booked for days not months, “due to the collapse of the vacation industry since the pandemic.”
Where the market is headed is anybody’s guess. Danison says incentives may become even more enticing because the pandemic could exacerbate the chilling effect of the colder months.
Meanwhile, Chen sees signs of a floor under rental prices this fall because although rates continue to fall, the decrease is slowing in speed.
“It’s definitely a crazy time and property managers are desperate to fill vacancies. If anyone is looking for a good deal, the next couple of months are a good time to be moving,” she said. “This trend most likely goes hand-in-hand with Toronto’s economic recovery from COVID.”