Last week, the Toronto Real Estate Board released the Market Watch Report for the month of May.
As expected, the market continues to soften.
Sales activity dropped 9% in May compared to April.
Average price dropped 3.3%.
These are just the overall numbers with all home types together in the GTA.
But they do represent the general trend.
The market is much quieter than before and people are hesitant to buy.
What’s interesting is that the rental market is painting a completely different picture than the resale market.
Higher interest rates are discouraging people from buying, so they rent instead.
People are going back to work in downtown offices, so they rent closer to work.
Immigrants and international students are coming back now and they all need to rent.
The downtown rental market is insane right now.
I’m going to share some official numbers and I’m also going to share our day to day field experiences because we are managing hundreds of rental units in downtown Toronto.
At the end of April, Toronto Star had this headline “Cost of renting a condo in Toronto is approaching pre-pandemic peak, report finds”.
One month later, the headline became “Prices are rising in Toronto’s rental market again - and so is the competition”.
“Pre-pandemic rental crunch is back as jobs, immigration and priced-out homebuyers add fire to an already heated market.”
According to rentals.ca, rents are up around 13% compared to a year ago.
Indeed, all these are in line with what we’re seeing in the field.
We are dealing with an overwhelming number of offers for the past 2 weeks, with people trying to secure a lease starting on July 1.
There are 2 types of applications we get the most.
#1 International Students
We listed a 2 bedroom unit for $3,100 a month at Yonge & College.
It’s within walking distance to both University of Toronto and Ryerson.
With just 2 days on the market, we got 7 offers.
Many of them are international students, they offered half a year upfront, one year upfront, trying to secure the deal.
In the end, the unit was leased at $3,200 per month, $100 above our asking price.
What does the official number say?
In the first quarter of 2022, Canada welcomed almost 90,000 international students.
That’s a 30% increase compared to Q1 last year and a 50% increase compared to pre-pandemic Q1 2019.
If we assume the same growth rate, we could see as many as 270,000 international students arrive in Canada between July and September.
I can tell you that we’re totally seeing the effect of that and I can foresee the rental market staying extremely competitive from now through to September.
The second type of rental applications we got the most is:
#2 Foreign Workers with Work Permits
For properties around the hospital area, we received quite a few offers from doctors coming to work in Canada from Saudi Arabia.
We also saw job offers from Amazon to work permit holders.
In general, the high tech industry is very actively hiring foreign workers.
According to the immigration department, over 100,000 work permits will likely be issued in Q3.
It is definitely a landlord’s market right now.
Essentially if we put up a unit for a week and there’s no offers, something must be wrong.
And this is just the beginning, wait till July and August, it will get even more competitive.
Besides study and work permits, there are also people getting permanent residency.
The grand total?
We are going to see 500,000 people land in Canada just this summer.
In preparation for that, we are looking for more agents to join our rental team.
This is an excellent opportunity for you if you are looking for a very stable income stream.
If we look ahead further, what’s the implication of having an extremely strong rental market?
It’s going to drive sales.
It’s apparent that there is a lot of demand for housing units.
More demand, more competition, higher rents.
New comers who are renting now may be purchasing in the future after they settle down.
Investors will be back because the higher rents will make the higher interest rates negligible.
Besides, mortgage interest is an expense for investors in the tax returns.
You see, everyone is so focused on the cooling market and trying to predict how much prices can drop.
I wanted to give you a different perspective from the rental market because the rental market is going to drive sales.
You need to have a big picture in order to make a good decision.
If you’re sitting around with cash and waiting for prices to drop, think twice, you might end up with inflation eating up your pay cheque.
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