Toronto Population to Explode
Blog Toronto - Lauren O'Neil
Ontario is expected to add a whopping 2.27 million people to its current 14.5 million residents within the next ten years alone, according to the Ministry of Finance — 1.2 million of them in the Greater Toronto Area.
Government officials project that the City of Toronto proper, which currently has a population of nearly three million residents, will add roughly the same number of new residents on its own by 2046. In other words, if Ontario's Ministry of Finance is correct in its projections, nearly four million people will be living in the 416 some 25 years down the line.
“Ontario's population grew by nearly one million people in the five years between July 1, 2016, and June 30, 2021, after growing by just over 600,000 persons in the previous five years."
A new research paper from the Ottawa-based Smart Prosperity Institute called Baby Needs a New Home, released this week, asserts that Ontario needs to build at least one million new homes over the next ten years to meet the demands of its rapidly-growing population. Failure to do so will push young families out of many cities and communities, further and further, until they find places that are affordable to live, similar to the exodus we've seen from Toronto amid the COVID-19 pandemic.
"Toronto's population grew faster [from 2016-2021] than the housing needed to accommodate that growth. Accelerated housing demand, coupled with no real change to the rate of home completions, ensured that the demand for housing exceeded the supply," notes the report. "Not surprisingly, this led to escalating home prices (as well as rents) in the City of Toronto, but it also led to an exodus of young families out of the city of Toronto in search of housing...
If the Ontario Ministry of Finance's population projections prove accurate and 2.27 million new people join the province by 2031, researchers say an additional 911,347 households would be formed. And that's not including those formed over the past five years.
"Of the 910,000 net new households formed over the next ten years, primarily made up of couples planning on having children, we project that 195,000 will live in high-rise apartments (of five storeys or more), while 715,000 will live in all other forms of housing," notes the institute. Ultimately, whether or not this demand can be met depends on policy decisions made now related to immigration, labour, international students and (most notably) housing.
"If Ontario manages, through the complex planning system that ultimately requires municipal governments to implement Official Plans, to ensure housing supply matches with projected housing demand, the provincial economy and residents of the province will benefit enormously as the quality of life improves and housing becomes more available, attainable, and sustainable."
GTA VACANCY RATES DOWN IN NEW BUILDS
Urbanation’s latest survey of purpose-built rental buildings reveals that the average Toronto vacancy rate has dropped from 5.1 per cent in Q2-2021 to 3 per cent in Q3. This is less than half the rate it reached in Q1-2021 (6.4%) and is now at a level considered to be balanced. In the downtown market specifically, the average Toronto vacancy rate fell to 3.8 per cent in Q3 from 6.6 per cent in Q2, after reaching a high of 9.0 per cent in Q1-2021.
“The rental market recovery heated up considerably during the third quarter as economic restrictions continued to be lifted and the population began returning back to the core,” said Shaun Hildebrand, President of Urbanation. “The stage has now been set for the GTA rental market to return to pre-COVID levels in short order.”
Average rents for units that were leased within newer buildings completed since 2005 reached $2,389 ($3.30 per square foot), up 3.8 per cent from the second quarter and 1.7 per cent year-over-year. Urbanation says this is the first annual rent increase recorded in the City of Toronto since the start of the pandemic; however, this growth is attributed to a small number of pricier new builds.
Notably, there was also a reduced presence of incentives being offered during the third quarter of 2021, with 57 per cent of surveyed buildings giving some form of incentive compared to 88 per cent last quarter. One month of free rent remained the most common incentive, followed by two months’ free rent and move-in bonuses.
The number of leases signed for condominium rentals in the GTA totaled 13,969 units in Q3-2021—increasing 6 per cent from Q3-2020.
Market conditions tightened considerably during the third quarter. The ratio of leases-to-listings grew to 82 per cent—the highest level since Q3-2019—while the average days on market fell to 16, which is the lowest since Q3-2019.
Active quarter-end listings dropped 69 per cent from a year ago and equalled 0.7 months of supply based on lease volumes averaged over the past 12 months, which was the lowest amount of inventory on the market since Q3-2018.
At an average of $2,304 ($3.31 psf), condo rents in the GTA surged by 8.2 per cent in Q3-2021 from the previous quarter, pushing rents up 3.8 per cent year-over-year. Rents were almost fully recovered to pre-COVID peaks, coming within 4 per cent of the Q3-2019 high. The increase in rents was strongest in the former City of Toronto, which posted an 11.4 per cent quarter-over-quarter and 6.2 per cent year-over-year increase to $2,405 ($3.62 psf). However, compared to two years ago, rents were down 6.9 per cent.
PAYING FOR AIR IN YOUR WATER
f you haven’t noticed, the price of water is going up. Often overlooked in favor of its more costly cousin electricity, water usage in buildings is quickly becoming a major expense. With electricity conservation stealing the show and garnering most of the capital expenditure for building improvements, water systems investments have few options for quick savings. Soon, though, improving water conservation will be just as important as electricity.
Average water prices and sewer bills in 50 major American cities are rising. In 12 of the biggest U.S. cities, the price of water and sewage increased by an average of 80 percent between 2010 and 2018, according to an analysis by The Guardian. For now, the problem is relatively nascent. Water is still cheap, much cheaper than electricity, but regardless of how relatively expensive water is, it can still eat away at a building’s NOI, hurting valuations.
Water billing is volumetric but not everything in water isn’t actually water. There’s plenty of gases in water, like the oxygen fish use to breathe. In volumetric billing, you’re paying for all that gas in the water, not just the water itself, because the water meters read it all as additional volume. Once water is used, its pressure typically drops. Water is delivered at 65 psi, so opening a fixture in the building causes a drop in water pressure, expanding the air present and causing flow surges, both of which read as the increased volume at the meter. That means building owners pay for more water than they receive.
When installed on the downstream side of the water meter, the valve reduces pressure drop across the meter by creating a core of pressurized water keeping gas dissolved, thereby limiting its volume as the water passes through the meter with gases still compressed. The variable resistance of the valve acts as a shock absorber, maintaining even flow profiles despite usage by eliminating pressure drops and surges at the meter. In layman’s terms, the valve keeps bubbles out of the water so you’re not paying extra for them.
The device is based on Boyle’s Law, a scientific principle stating that a gas’s pressure and volume are inversely proportional. When you squeeze a balloon, the volume occupied by the air inside decreases, accompanied by an increase in pressure exerted by the air of the balloon. Boyle’s Law is why scuba divers must ascend slowly. If divers ascend too rapidly, the decreasing pressure can cause the air inside their bodies to expand too quickly resulting in decompression sickness, a life-threatening condition commonly referred to as the bends. Applied to water in pipes, when pressure decreases at the meter, the air inside the pipe expands, thereby raising water bills based on volumetric meters.
The variable spring-loaded plunger/flow management device (FMD) maintains a constant pressure on the incoming water supply directly adjacent to the meter, allowing the water to pass through in a compressed state, soon after returning to its original uncompressed state. The valve isn’t removing the air or compressing it, it’s simply preventing it from expanding. Water billing is dependent on many factors making generalizations difficult, but case studies verified by the Texas A&M Engineering Experiment Station have shown a 22 percent reduction in water and sewer expenses with FMD, saving roughly 10-20 percent on water bills with payback typically in 1 to 2 years depending on volume.
Nando Presciutti of WCC Water Management Services in Toronto says they have done over 600 installations of the FMD in apartment buildings and the results have bee fantastic. In the GTA we are seeing payback periods as low as 6 months to as high as 3 years. Not only that, the immediate impact on the Net Income of the building will increase its value. WCC is a company in Toronto that focuses on water conservation and includes flood and leak monitoring and prevention technology to clients and water sub metering.
2 BALSAM STREET SOUTH - HAMILTON - $3,525,000 / $235,000 Per Suite / 4.00% Cap Rate
This property comprises a 15 suite walk up rental apartment building investment in central east Hamilton. It is a low rise building dating from the 1920's and is a corner site. This is a low maintenance building with no underground garage or elevator. The property was fully marketed and with multiple interest and the bid winner was a private investor. There were 7 suites fully renovated at the time of sale. Tenants paid their own hydro costs. This property was Listed and Sold by the Apartment Group.
477 DEAN AVENUE - OSHAWA – $19,125,000 / $375,000 Per Suite / 5.25% Cap Rate
This property is located in east Oshawa in a single family residential neighbourhood. It consists of a 51 rental townhouse units mostly two and three bedroom sitting on a large 2.36 acre site. It was constructed in the 1960's. The property had 38 suites totally renovated and sub metered for all utilities. Lots of money was put into the project in the last five years. There is additional land to build another 16 units on site. Rents are still below market. The property was not fully marketed and was sold the Apartment Group. The purchaser was a private investor.
200 NELSON STREET WEST - MEAFORD - $4,530,000 / $156,000 Per Suite / 3.50% Cap Rate
This property is located in a rural location about 20 minutes west of Collingwood. It is a 1.47 acre site improved with a low rise walk up rental apartment building with a total of 29 suites. It is of concrete construction with brick exterior and flat roof. It was built in 1986's has mostly two and three bedroom large suites. The rents in the project were far below market and the building was in good condition for its age. This property was fully marketed and listed and the buyer was a private investor who was represented by the Apartment Group.
2707 YONGE STREET - TORONTO - $14,300,000 / $297,915 Per Suite / 2.12% Cap Rate
Located in along Yonge Street south of Lawrence, this is the sale of a mid rise 48 suite rental apartment building on a 0.31 acre site dating from the 1950's. The building comprised mostly of bachelors and one bedrooms and was heated via a gas fired radiant system. Hydro was separately metered but the owner was paying for the costs. The sellers were long terms owner managers and reportedly the building needed lots of immediate capital work. The rents in the building were over 70% below market. The property was fully marketed and purchased by a private investor.
THE APARTMENT GROUP
Together the team has completed over 1,500 transactions and has sold over $6.5 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.
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