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Toronto is the economic epicentre of Canada, and as such, rental housing is often snapped up quickly. The age-old economic rule of supply and demand means that Toronto is also the most expensive city in Canada to rent an apartment or condo.
However, with the advent of Coronavirus, there have been significant declines in the cost to live in one of Canada’s hottest real estate cities.
As of June 2020, rental rates in Toronto dropped -1.52% for a studio apartment to $1,557. A one-bedroom in Toronto dropped -2.66% to $1,865 and a two-bedroom dropped -4.16% to $2,255. A downtown studio dropped -2.15% to $1,685 in June. A one-bedroom dropped -2.52% to $2,050 and a two-bedroom dropped -0.93% to $2,656. In Midtown, a studio apartment dropped -1.85% to $1,541 in June. A midtown one-bedroom dropped -0.31% to $1,922 and a two-bedroom increased slightly by 1.35% to $2,558 in June.
Several factors will continue to affect the rental market as we progress through the year and see the full effect of the pandemic on the economy. As unemployment rises, more people are choosing to move back home to save money, or they have decided not to move into a rental unit. Also, people who rent are much more likely to experience job loss in this economy, further dampening their ability to move out of their current rental unit or into an owned home.
In the fall, if universities and colleges (of which there are eight in Toronto) do not open for classes on campus, that will put further downward pressure on the city’s rental market.
The Canada Mortgage and Housing Corporation (CMHC) has also tightened its requirements for first-time homebuyers. The CMHC now states that first-time buyers may not borrow their down payment, and they must have a minimum credit score of 680. So even if the residential real estate market declines, as it’s done, it’s more challenging to qualify for homeownership today and move out of a rental unit.
Several popular downtown Toronto neighbourhoods have also been affected by the dropping rental rates. In the south financial district to the lakeshore, postal code M5E, rental prices have plummeted $449 per month from the first five months of 2019 to today. That’s a 15% decline in one year, from $3,029 to $2,580. In the Entertainment District along King Street West, rental rates have gone from $2,630 to $2,512 or a net reduction of $118 per month.
As the pandemic evolves, and people’s living and working habits change, it will be interesting to see how it further affects the Toronto rental market. Some things to watch for are, whether people choose to live outside of the dense, downtown core, particularly if they are working from home more often. Or will they want to avoid transit and live closer to work? Time will tell. In the meantime, if you are looking for a good deal, now’s the time to rent in Toronto.