Canadian Apartment Rents UP 8% Over Last Year
The latest report from Rentals.ca and Bullpen Research & Consulting reveals that although rental rates have declined across Canada for the second month in a row, overall they are up 8 per cent from the end of 2018.
Despite August being one of the busiest months for moving in Canada, that didn’t result in an increase in rental rates month over month, as the average rent for all property types on Rentals.ca declined by 0.7 per cent to $1,914 per month.
This follows a decline of 1.3 per cent in July. The median asking rent in August of $1,800 per month is also down from July ($1,825).
"Tenants willing to pay MORE for renovated suites"
Many landlords have been upgrading and repositioning their multi-residential buildings to capture some of renters’ willingness to pay for better amenities.
Citing preliminary results of the fourth annual Canadian Multi-Res Tenant Rental Survey by Informa, the report indicates that just over one third of the responding 18,000 tenants said they would be willing to pay more rent for a renovated kitchen and bathroom. Fewer than half indicated they are happy with their rental unit as is.
With more apartment renovations and rising rental apartment completions in the pipeline, the report predicts we could see double-digit annual rent increases in Canada for 2019, and considerable movement over the final months of the year.
Survey data also shows that tenants in Toronto are spending 42 per cent of their income on rent, while tenants in Vancouver are spending 34 per cent.
“Part of the explanation for this gap are the smaller apartment sizes in Vancouver versus Toronto, but a potential factor could be an increase in the number of households with roommates,” said Ben Myers, president of Bullpen Research & Consulting.
With many Ontario cities in the high rent category, the province remains the most expensive market for rental apartment over the past three months with an average rent of $2.57 per square foot. Rent has increased significantly in British Columbia from late last year to $2.49 per square foot, up from $2.01 per square foot in Q4-2018.
Other takeaways from the September National Rent Report include:
- Part of the decline in the national rental rate in August can be attributed to a decline in the percentage of higher-priced condominium apartments and single-family home listings in August, and an increase in the less expensive rental apartments. The chart below shows the monthly breakdown of Rentals.ca listings since October 2018.
- The Tenant Preferences Survey shows that Toronto renters under 30 are spending 49% of their income on rent. The CMHC recommends no more than a 30% rent-to-income ratio. Also, from the data on Rentals.ca, there is a clear preference among prospective tenants for downtown Toronto.
- In Halifax, rental rates have been rising quickly in 2019 with the average rent increasing by over $300 per month from early 2019 for all property types.
- The median rental apartment unit listed on Rentals.ca in Halifax has grown significantly over the last six months from under 1,000 square feet to 1,400 square feet. With almost 4,000 new rental apartments completed from 2016 to 2018 in Halifax, and another 877 in 2019, there are a lot of new units leasing, plus the popularity of Rentals.ca in the province is attracting new landlords with older and larger product.
Toronto Benchmark Portfolio Apartment Sale
The Apartment Group
Akelius Canada employs more than 100 people out of its Toronto and Montreal offices. It entered those markets in 2011 and 2014, respectively where it owns more than 4,000 apartment units. Since entering those markets, Akelius has been one of the most aggressive buyers in the apartment market and quickly amassed a large well located portfolio of apartment buildings.
All of Akelius Canada’s properties are managed in-house. Akelius Canada is a subsidiary of Akelius Residential Property AB, the largest listed real estate company in Sweden. It was founded in 1994, employs more than 1,200 and owns 49,000 apartment units in Sweden, Canada, Germany, the United States, the United Kingdom and Denmark. Akelius Residential Property AB says its total asset value is around $18 billion.
In 2019, they decided to reposition their holdings and get rid of non core properties and concentrate on renovating and retrofitting all their existing projects. At the same time they were building out their flag ship head office at 533 College Street. This is a 35,000 sf office building which they purchased in May 2017 through The Apartment Group.
In early 2019, Akelius put on the market a number of their apartment buildings for sale (665 suites in 13 buildings). They ranged in size from 20 to 122 units and average 713 square feet. The portfolio is comprised of 16 per cent bachelor, 47 per cent one-bedroom, 30 per cent two-bedroom and seven per cent three-bedroom suites. About 307 of the suites have been renovated with spa-grade bathrooms, European kitchens, in-suite laundry, engineered wood flooring, and modern aesthetic trim and doors.
In total 12 of the 13 buildings sold to Starlight Investments Ltd. for over $176MM or just over $280,000 per suite. Overall the cap rate was around 3.75%. The 12 buildings comprised 625 suites and represent a substantial transaction in the Toronto market.
Canada's Population is Growing FAST
Canada's population was estimated at 37,589,262 on July 1, 2019, up 531,497 compared with July 1, 2018. Such an annual increase in the number of people living in the country is the highest ever observed. This growth also corresponds to adding just over one person every minute. The country's population aging continues, with the number of centenarians topping 10,000 for the first time. In addition, baby boomers now account for the majority of seniors.
The country's annual population growth rate for 2018/2019 was 1.4%, the highest percentage growth rate since 1989/1990 (+1.5%). Canada's population growth rate is the highest among G7 countries. It is more than twice that of the United States and the United Kingdom (+0.6% each) and exceeds the growth in Germany (+0.3%) and in France (+0.2%). In the last year, Italy and Japan both recorded a population decline (-0.2% each).
Canada's sustained population growth is driven mostly (82.2%) by the arrival of a large number of immigrants and non-permanent residents. Canada admitted 313,580 immigrants in 2018/2019, one of the highest levels in Canadian history. In 2015/2016, Canada received 323,192 permanent immigrants, including nearly 30,000 Syrian refugees.
In 2018/2019, Quebec (+1.2%) saw its largest population increase in 30 years, while Ontario (+1.7%) recorded one of the highest growth rates for the same period.
RECENT APARTMENT SALES
207 Lisgar Avenue – Tillsonburg – SOLD $1,880,000 / $94,000 per suite / 5.00% Cap Rate
This property was sold by The Apartment Group and comprises 20 apartment suites in Southwestern Ontario. The asset comprised of a three storey walk up rental building with low rents and some deferred maintenance. It was full at the time of sale. The property was sold by a private owner and was not marketed. The Apartment Group represented the Buyer who is a private investor.
3101 Eglinton Avenue East – Scarborough – SOLD $19,700,000 / $289,700 per suite
This is a property located in north central Scarbrough close to many other similar apartments. The 1.5 acre site is improved with 68 rental suites constructed in 1947. Rents are considered to be far below market at the time of sale. The 6 storey building was heated by a gas fired radiant system and had two elevators. This asset was fully marketed and was purchased by Starlight Investments Ltd.
Portfolio Purchase Akelius– Toronto – SOLD $176,280,000 / $282,050 per suite / 3.8% Cap Rate
This portfolio comprised 12 projects and a total of 625 apartment suites and townhouse units. The assets ranged from 20 to over 100 suites and comprised various locations in the Toronto area. The buildings were well maintained and substantially upgraded over the past 5 years and over 50% of the suites have been totally renovated. The portfolio was fully exposed and market and purchased by Starlight Investments Ltd.
6 Auburndale Court, Etobicoke – SOLD $18,000,000 / $219,500 per suite
This is an 8 storey rental apartment building is located in a great rental area in Etobicoke. It has a total of 82 rental apartments built in 1964. The building has elevators and surface and covered parking and sits on a large 2.3 acre site. Rents are considered far below market. This asset was fully marketed and was a court appointed sale. The buyer was Starlight Investments Limited.
41 Dundonald Street, Toronto – SOLD $35,000,000 / $346,535 per suite / 2.75% cap
This is a high rise rental apartment building located in the downtown core of the City of Toronto. The half acre site comprises of 101 rental apartment suites and was constructed in 1969. It has surface and underground parking and the average suite size is around 650 sf. It was owned by the same person for many years and was well maintained with rents far below market. This asset was fully marketed and exposed. The buyer was Timbercreek Asset Management.
THE APARTMENT GROUP
Together the team has completed over 1,000 transaction and has sold over $5 billion in apartments and development land. Put us to work for you and see the results. NO ONE has sold more buildings then your group. Experience, knowledge and professionalism will insure you get the right deal or the highest price if you are selling.
The Apartment Group is a dedicated team of professionals specializing in the sale of multi-residential investment properties. With over 40 years of combined experience, the team brings together their strengths including strong negotiation and sales skills along with highly technical market analysis and appraisal methods.
We are a boutique Brokerage but have the capabilities of the larger houses without the overhead. We have: an internal database of over 10,500 active apartment and land Buyers; a list of all apartment building owners in the Greater Toronto Area; our web site gets over 50,000 hits a month; we highlight properties for sale through our newsletter which reaches 10,000 investors monthly.
President & Owner,
LORENZO DIGIANFELICE, AACI
Broker of Record, Owner