I really don't know where to go with this post.
Could the market “change direction in an instant”?
If so, do you believe my recent article provides greater insight into the current rental market than the data from the past three months?
The rental market has been struggling all year, and my colleague Tara Amina and I discussed it last week on our weekly podcast, which you can watch on YouTube here or listen on Spotify here .
Most of our conversation was about how the market has changed this year and how horror stories of paying 12 months' rent up front, competing with 10 other tenants, and submitting a lease offer on a scheduled “offer night” aren't going to happen in 2024 like they will in 2023.
But last week I announced three rental listings and the results left me wondering if the rental market has turned around.
The first property was a one-bedroom, one-bathroom unit at 40 Scollard Street in Yorkville.
The building is old and tired, but it's still Yorkville, and it's been a hit or miss rental property for the last decade.
He previously rented for $2,450 a month, but put the property on the market this year for the same amount because he thought the market was slow and he wanted quality tenants instead of the extra $50 in rent.
The property has had 18 viewing appointments, of which 7 have resulted in offers to purchase.
If we had waited longer, or if I hadn't been so transparent and upfront with the realtor (instead of telling them not to bring in offers because we had a contract with a tenant, we were just researching carefully), we may have had more viewings and offers.
The unit leases for $2,600 per month, which is the most I have paid in the 10 years I have leased this unit.
The second property was a two-bedroom, study, two-bathroom unit that had previously been listed for sale, but the owners decided to hold on to it for at least another year to see what future apartment prices would be like.
Historically, the rental market for larger properties has also been hit or miss and has been very slow in recent months.
This same model property was renting for $3,500 and $3,400 this year, but $3,700 last fall. We decided to try renting it out for $3,600 a month.
On the first day of listing, there were five reservations made to view the property.
I received the offer the next day.
While we were considering offers from two very qualified tenants, we also received a second lease offer.
We selected a tenant and leased the unit for $3,600 per month.
Like our first property, we would have received many more viewings and offers had we listed this property longer, and it was clear that the rental market for this type of property was also booming.
The third property, listed last week, is a two-storey unit with 1,200 square feet and 300 square feet of terrace space, priced at $4,600 per month.
There were only two screenings.
However, during these two viewings, we received full price offers from very high quality tenants.
So, has the rental market changed over the course of a week?
Summer tends to be a very busy time as students try to secure rental properties before September 1st, but going into this summer we expected the 2024 trend to continue.
Let's look at the data…
First, let’s look at the second quarter rental listings.
Historically, more properties are listed in the second quarter than in the first quarter, so this increase is in line with past results.
However, the absolute number of properties listed is at an all-time high.
June's 3,412 new rental listings are more than double the 1,520 listings in June 2018.
That's only six years. The city hasn't doubled in size since then.
And if we simply compare it to 2023, the year-over-year figures for April, May and June are significantly higher at 48%, 39% and 48% respectively.
These increases are well above the first quarter, which saw year-over-year increases of 43%, 35% and 31% in January, February and March.
Looking at the graph, the green line tells the story.
With the exception of February, every month so far this year has seen a record number of new listings.
The contrast between the green line (2024) and the dark blue line (2018) is striking.
I love numbers and statistics, but I'm also a visual thinker. This graph, visually, is like a work of art to me. It's more Edvard Munch than Bob Ross, if you know what I mean. But it tells a story…
When it comes to the number of rental properties, anything less than a 40-50% increase year-over-year will weaken the rental market, so look at the following:
As I said, any price increase less than a 40-50% increase would weaken the market, and that is exactly what happened.
Meanwhile, rental numbers in April, May and June were near all-time highs, with April and June only slightly below 2021 levels and May setting a new record. I should also add that rental numbers are now double what they were in 2018.
However, while “new listings” were up 48%, 39% and 48% year-over-year in April, May and June respectively, “rentals” were up only 28%, 28% and 23% respectively in the same period. This will be a huge hit to absorption rates, but more on this later.
The number of leased units is graphed as follows:
July 2021 seems like a bit of an outlier, doesn't it? That said, there is a spike every July, so the 2021 data point may simply have been the result of the aftereffects of the 2020 pandemic on the rental market.
If we just look at rental property, regardless of new listings, we could argue that 2024 was a great year for the rental market.
Unfortunately, both demand and supply are important factors in the “supply and demand” equation, which leads to the absorption rate…
If you were jumping into the Toronto rental market from somewhere else and had no idea what was going on, an 80% absorption rate would seem… high, wouldn't it?
Probably they will.
But this needs to be put into context.
June Absorption Rate 2018-2024:
87%
83%
95%
97%
96%
80%
A drop from 96% to 80% is not a catastrophic drop, but it should be enough for the market to feel it.
And when you look at the “year-over-year” data, all you see is red.
Is the rental market weak?
Maybe not, with Q2 absorption at 76%-80%, but on paper it's certainly weaker than the past two years.
Again, the green lines tell the story.
Whether this translates into lower prices, better negotiating power and greater leverage for tenants remains to be seen.
I had been hearing a lot about the weak rental market until we happened upon three rental listings last week, but my experience did not match what the data above indicated.
To be fair, we are looking back at the second quarter and the three rentals we listed went on the market in mid-July.
But leasing a unit that was priced at $2,450 a month for $2,600 a month would probably have generated 10 to 12 applications, so the rental market has bounced back, at least for now.
If anyone has any rental experiences from the past 3 months, I'd love to hear them.