GTA Apartment Rents - Truth not Fiction

The Apartment Group

We are constantly hearing on radio and TV how rents are blowing up sky high everywhere and how hard it is to find an affordable apartment anywhere in the GTA and in most other markets as well.  In Toronto, many are placing the blame at the high price of home ownership which in effect is increasing the supply of renters and hence rental demand and with low or no supply prices move up.  Is this the case?

"Vacancy in Toronto has gone up 36% in the last year."

Being a numbers guy, let's take a look at the data as collected by the Canada Mortgage and Housing Corporation (CMHC).  Their most recent rental survey shows that the average rent in Toronto was $1,459 per month in October 2019 for purpose built rental product.  This is 7% higher than the year before.  This was much higher than the allowable rental increase of 1.8% as "established" by the Province.

Overall the rents ranged form $1,141 for a bachelor suite to $1,732 for a three bedroom suite.  Over the past 4 years the rents have increased by over 18% or around 4.5% per year.  Rents have been on the rise in this market for the past decade and are expected to continue to rise.

The Secondary Rental Market is defined as those condo units which are rented out instead of occupied by homeowners.  For those units rents in October of 2019 averaged about $2,307 per month and this is 58% higher than rent in the purposed built older stock.  Compared to 2018 the rents in the Secondary Market rose by 3.2% which is half the rate of the increase in the purpose built market.

The amount of condo rental units in the overall condo market today is about 30%.  This figure has generally held steady over the last decade.


So we have established that yes rents are going up.  In fact they are rising much faster in the purpose built market than the secondary condo market.  As well, rents are increasing much faster than the guideline increase as set by the Province. So....


If there is indeed a supply demand in balance than this would show up in the vacancy rate and massively you would expect.  In the purpose built rental market the vacancy rate as of October 2019 was 1.5% or up 36% from 2018 which was 1.1%.  Over the past decade the vacancy ranged from 1.0% to 3.2% and averaged around 1.35%.  In the last 4 years the vacancy ranged from 1.0% to 1.5% and averaged 1.25%.  So one can conclude that over the past decade the vacancy has been relatively stable.

The same is true with the Secondary Market.  In October 2019 vacancy rate here was 0.8% up slightly from 0.7% the previous year.  Over the past 4 years vacancy has ranged from 0.7% to 1.0% and average 0.8%.

So the increase in demand is really not seen in the vacancy.  Vacancy has always been low in the GTA and with rent controls new stock is slow to be built - it was always thus.

On the supply side, there are 323,340 purpose built rental suites in the GTA in 2019.  In 2009, there were 315,375 suites which is an increase of about 7,965 suites or just under 800 suites per year.  In 2009 there were 49,945 units in the secondary market classified as rental.  In 2019 this grew to about 137,800 or an increase of about 8,800 units per year.  Given the amount of growth in this market in terms of units and the high rent and low vacancy, we conclude that these are the units being rented to those shut out of the housing market.  These are tenants with good jobs earning good money but just do not have the savings to purchase - that said they want to live in something modern with full amenities.

The strong rise in rents in the purpose built market has more to do with renovations in suite and improving building qualities and amenities in these 35+ year old buildings.  These suites tend to have a lower amenity package than new units but they also tend to be larger.  As well, tenants who rent in purpose build buildings have security of tenure and stability of rental increases which will be known and established by the province where as those in new buildings do not.

We sold a building last year in Scarborough were in place rents were $1,200 per month and renovated were $1,800 per month.  It is our conclusion is that this trend will continue and cap rates in older building will compress further.







Purpose Built Rental Up - Not Enough

The Financial Post - Murtaza Haider

After decades in the doldrums, rental housing construction is starting to pick up again in Canada.  Statistics Canada data shows an increase in the number of purpose-built rental (PBR) units under construction in urban regions, where the demand for rental housing has been high.  The increase in PBR construction is led by the Montreal Census Metropolitan Area (CMA), where the share of renter households is the highest among the major cities in Canada. The Vancouver CMA follows Montreal with the second largest number of PBR starts.

PBR construction also saw a moderate increase in the Toronto CMA, but at a level not nearly commensurate with the substantial unmet demand characterized by ultra-low rental vacancy rates and rising rents.  Statistics Canada reported 45,569 rental starts for all CMAs from January to November 2019. For the same period in 2018, rental starts stood at 36,796 units. That works out to a 25 per cent increase.

The federal Liberals and some provincial governments have put in place regulations to spur rental construction. While the incentives seem to be working in some places, additional measures are needed to bring PBR construction in line with the pent-up demand for rental housing.

The recent resurgence in rental construction, though welcome, falls considerably short of the rate at which rental units were being built in the early seventies, when rental construction began to nosedive. Changes in tax regulations and the introduction of rent control as vacancy decontrol disincentivized investors who left the rental construction business in droves.

At the same time, the emergence of condominiums provided an alternate channel to supply additional housing stock for rental purposes.

A lack of enough supply of no-frill PBR units (with relatively lower rents and guaranteed long-term rental tenure) and their partial replacement by rental condominiums with relatively expensive rents created two distinct challenges in growing cities like Vancouver and Toronto.

First, the rental vacancy rates reached alarmingly low levels with some large urban centres reporting vacancy rates as low as one per cent. Second, rents continued to rise at an accelerated pace. Even in jurisdictions like Ontario, where the provincial government imposed new restrictions on rent increases in 2017, rents in urban markets rose unabated.

Developers and investors have finally started to respond to rising rents and falling vacancy rates in urban rental markets. Montreal, with over 12,000 rental starts and Vancouver with over 6,000 starts, led PBR construction in 2019. Toronto reported only 4,000 rental starts in the first 11 months of 2019.

Are places like Toronto doing enough to meet the unmet rental housing demand? A report by RBC Economics believes additional incentives are needed to meet the growing rental demand in Toronto. While recognizing the growth in PBR supply, the report still noted that “rental supply is unlikely to come close to demand in the coming years.”

In the last federal election, the Conservatives, Liberals and NDP put forward several proposals to increase the supply of PBR housing in Canada. It is time to implement the best and most practical ideas to expedite large-scale construction of rental housing.





Apartment Upgrades - Using Consultants is Important

Most of the existing apartment stock was built between 1945 and 1975 and built for rental accommodation as the concept of condos was born in the late 1970’s.  These buildings were well constructed with suites on the larger size due to their focus on families and couples.  Many of the buildings have been renovated and updated over time common areas and the suites.  However in many instances these were down by the owner alone with no consideration for target market or architectural style.  Most owners wanted to the renovation which cost them the lease amount of money.  As the saying goes “penny wise pound foolish”.

Many owners over time found out that on turn over they had to go back and renovate again due to cheaper materials and poor quality fixtures and appliances.  Many also found out that the renovations they completed did not generate the highest rent per square foot possible and thus lost out on the income side as well.  Owners as well were totally focused on in suite renovations which yes increased the rent on that suite but did nothing to raise existing rents.

Hiring a consultant/architect can avoid many of these issues and pit falls.  They understand that to maximize the income of the building you must start from the outside in.  Just like in the restaurant business 80% of people make up their mind on how good the food is way before they take their first bite.  The reception at the door, mood, lighting and music and server service have more influence on the overall experience than the product in the end.  Same with apartment buildings – the landscaping, entrance vestibule, lobby, elevators, hallways all influence rental expectations before entering the suite.  Amenities too play an important role as most older apartments do not have any and new condo buildings have it all.

A good consultant will know what to change and tinker with.  They will also know how to use the best materials and the lowest cost.  They will also know what design and materials will not only stand the test of time but also be resilient to damage accidental or not.  They are also a good third party perspective on what should be done and will give an unbiased approach to the entire process.  Yes in the end hiring a consultant will cost you money, but in the end they will save you that ten fold over the next decade.  They will also manage the entire process taking that time out of your hands which is better spent in other areas.

Contact: Emami Design - Amir Emami - 416-226-9353 -



314 Lonsdale Drive – Toronto – SOLD $10,490,000 / $1,311,250 per suite / 3.35% Cap Rate

This is a property located in the heart of Forest Hill in a prime residential area.  This is an internal location with a building from the 1920's comprising a total of 8 rental suites.  The building was substantially upgraded over the past four years and all of the suites were totally renovated to a high quality.  This was a low maintenance easy to run asset and was fully marketed and was purchased by Westdale Prope

11-25 Sherwood Avenue - Toronto – SOLD $34,500,000 / $338,235 per suite / 3.47% Cap Rate

This is a complex of four apartment buildings all being three stories located in the Yonge and Eglitnon area.  It comprises of a total of 102 rental apartment suites on 1.33 acres of land.  This is a wood frame building dating from the 1920's with no elevators and balconies.  The building was totally renovated in 1989.  This asset was fully marketed and exposed.  The buyer was Minto Properties Inc.

2777 Kipling Avenue – Toronto – SOLD $92,675,000 / $285,150 per suite

This was owned by Minto Properties and was sold along with other assets that it owned in Toronto.  It comprises of a two high rise concrete rental apartment buildings dating from the 1960's.   The 4.93 acre site was developed with 325 suites and there are balconies and elevators and underground parking.  There is hot water gas fired radiant heating system and hydro is separately metered.   This property was fully marketed and was purchased by Q Residential.

65-75 Paisley Boulevard West – Mississauga – SOLD $47,200,000 / $304,515 per suite / 2.95% Cap Rate

These are two mid rise rental apartment buildings located south of the the downtown core of the city.  They are of concrete construction and comprise of 155 rental suites.  The property is situated on 3.05 acres and building amenities included: laundry, underground parking and a convenience store.  This property was fully marketed and purchased by Equiton Residential.

Heathdale Portfolio - Toronto - SOLD $37,250,000 / $332,590 per suite

This was a sale of two properties in Toronto being - 82 Warren Road and 1598 Bathurst Street - a total of 112 rental apartment suites.  They have been in the same ownership for many years and are located in the Bathurst and St. Clair area.  Both buildings were concrete assets dating from the 1960's with elevators and low rents.  These assets were purchased direct by Starlight Investments.




Together the team has completed over 1,000 transactions 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 our 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.

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