Coronavirus Infects Toronto Rental Market

We have only limited data so far, but already it is clear that the number of MLS rental transactions in the GTA has plummeted by about 50% since the COVID-19 restrictions were imposed just over a month ago. There were approximately 2,500 MLS rental transactions per month in January, February and March, but only about 1,300 such transactions in April.

So far, rental prices have held up remarkably well. The average MLS rental price for freehold properties (e.g., houses, apartments in houses, and apartment buildings) was virtually unchanged in April as compared with January-March, while the average price for condo apartment rentals was down about 4%.

With many tenants at least temporarily out of work, and many others in fear of losing their jobs, it’s not surprising that the demand for rentals has dropped; and, together with the temporary banning of Airbnb rentals, this has significantly increased the inventory of available rental properties.

All of this points toward a continued decline in rental prices together with a continued increase in rental vacancies as the lockdowns drag on. On the surface this might seem to be good news for tenants in a market that has been exceptionally tight and, indeed, in a crisis due to very limited availability of rental accommodation and ever-increasing prices. For many tenants (those who still have steady employment) this will, of course, be good news. However, everybody needs to live somewhere, and so perhaps we will have an even bigger crisis of a somewhat different kind.

The decline in the rental market may also affect the resale market, particularly for condo apartments. Investors may conclude that it’s better to sell their condos than to leave them vacant for extended periods and/or accept significantly lower rents. While it’s far too soon to project how this will play out, it could exacerbate an already fragile resale market and contribute to a self-reinforcing downward spiral in condo apartment sales and prices.

Let’s hope the lockdowns end soon!