Dear Fellow Real Estate Investors,
Here are some updates and insights on the current Residential Real Estate market.
Rent freeze for 2021
The Government of Ontario has passed legislation to freeze rent at 2020 levels. This means that rents will not increase in 2021 for the vast majority of rented units covered under the Residential Tenancies Act.
The rent freeze applies to most tenants living in:
- rented houses, apartments and condos (including units occupied for the first time for residential purposes after November 15, 2018)
- basement apartments
- care homes (including retirement homes)
- mobile home parks
- land lease communities
- rent-geared-to-income units and market rent units in community housing
- affordable housing units created through various federally and/or provincially funded programs
While the rent freeze will end on December 31, 2021, landlords can give proper 90 days’ notice beforehand for a rent increase that takes effect in 2022.
For more information, go here: https://www.ontario.ca/page/residential-rent-increases
What’s Happening with Downtown Condos? For Landlords, it’s a little “Cold” right now, but we anticipate a “Thaw” soon
For those of you that follow general real estate news, you’ll have heard that the downtown condo rental market is stagnating. Vacancy rates are higher than they’ve been in years. Average rents in the GTA are down 12%, and downtown specifically, rents are down 16%. Why is this?
The same volume of Toronto condos are being rented this year as were being rented last year. So the demand is the same. However, supply is definitely up: Last September, there were 3300 condo rental listings, and now there are 12,000! Where is this condo inventory coming from? Here are some theories:
- A recent report by a Toronto analyst indicates excessive inventory is due to more tenants vacating this year and moving to greener pastures (the ‘burbs, or back home to mom & dad). This could be because their respective employers have laid them off — e.g. they are service staff in restaurants and entertainment districts, or because respective employers are enabling them to work remotely, hence no need to live physically close to the office.
- Other studies show that Canada’s moratorium on immigration is largely to blame for the decrease in the absorption rate.
- The tourist business is virtually shut down, therefore AirBnBs are no longer a viable source of income to Landlords. We are seeing these units that were formerly marketed through travel and online-classified apps now being converted to long-term rentals and marketed through Realtors, hence showing up as inventory that didn’t previously exist.
- A few large condo buildings in downtown Toronto completed construction and started handing over the keys to purchasers – including many investors – in the first half of 2020, adding to the supply.
Until COVID-19 gets under control, the rental condo market will likely not change. But in a year or so, once we are back on track, we will see a surge in the condo rental market and a decrease in vacancy rates. Why?:
- There will be pent up demand from immigrants – where the Federal government was targeting 341k new permanent residents for 2020 (we’ll only hit 70% of that due to COVID), the Liberal government is now proposing 401k new permanent residents for 2021, and even more in the subsequent two years. That’s 1.2 million immigrants over the next three years! Many of whom will land in Toronto.
- Students that are currently choosing to study online from remote locations will return to the city as well.
- Let’s face it, for young people, the suburbs can be boring! Once nightlife and entertainment districts open up again, the downtown rental market will thrive as much or more than ever.
I personally feel it’s a great time the buy a pre-construction condo…something that will take occupancy in a year or two. They’re being sold at discount prices now, compared to recent years, and I think there will be huge upside once they’re completed. Message us if you’d like some ideas.
Rental Market in the ‘Burbs
If you’re looking for immediate rental income, invest in a suburban townhome. Like, now. We had one listed this week, hosted 12 showings and got 3 offers within a 4 hour window. This is just one example. The demand for homes like these far exceeds the supply. As we noted above, downtown condo dwellers want to trade elevators for backyards, and many are choosing to migrate to the suburbs. Again, message us if you’d like some ideas.
RESOURCES FOR REAL ESTATE INVESTORS
- Ontario Ministry of Municipal Affairs and Housing <—go here for general info about rental rights, rent increase guidelines, and rental housing enforcement guidelines.
- Ontario Landlord & Tenant Board. <—go here to access forms for landlords and tenants to use for starting/modifying/ending tenancies.
As always, please contact us if we can answer any questions about real estate investing!