Rental Market Conditions Soften
The Greater Toronto Area (GTA) rental market experienced softer conditions in 2009. The average vacancy rate for purpose-built rental apartments rose by a full per centage point this year to 3.1 per cent. Several demand and supply factors contributed to the higher vacancy rate, including a rebound in homeownership demand, youth job losses, moderate immigration, more purpose-built rental apartments and a greater number of condominium apartment completions.
Ownership Demand Rises
A rise in homeownership demand this year has reduced demand for rental accommodations. After starting off the year slow, sales levels in the GTA rebounded quickly over the spring and summer. Sales in both the existing and new home markets will surpass 2008 levels. For the most part, the past decade has shown us a positive relationship between homeownership demand and rental vacancies – when sales go up, vacancies rise as well.
A major reason for the shift towards owning this year is due to improved affordability conditions. Thanks to very low borrowing costs, the average monthly mortgage payment for a home in the GTA is down compared to 2007 and 2008. This has reduced the fi nancial commitment for households to move from renting to owning this year, prompting more renters to make their fi rst home purchase.
Information gathered from CMHC’s Renovation and Home Purchase Survey confi rms that a greater number of fi rst-time buyers are entering into homeownership as a result of the improved affordability conditions. First time buyers represent 57 per cent of intending purchasers this year versus a 33 per cent share that bought in 2008.
Younger Workers Lose Jobs Employment losses this year have mostly affected younger workers.
Since the average age of a fi rst-time buyer in Toronto is approximately 35, rental demand is largely driven by the under 35 workforce. Census data indicates that a quarter of younger workers in Toronto are employed in the manufacturing and retail trade sectors. The manufacturing sector has shed nearly 75,000 jobs this year while employment within the retail trade sector has been trending down for some time.
I hope this finds you Happy and Healthy!
All the Best!
A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate
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