Finding a sweet spot in the rental market
December 23, 2010
Jennifer Brown
SPECIAL TO THE STAR
When Dan Kashvin went looking for a new apartment two months ago, he wasn’t at a loss for options.
A young single professional, Kashvin wanted to be right downtown, and when he went online to look at rental listings for a two-bedroom apartment near the waterfront he realized there were a lot of condo units to choose from, but they were a little out of his price range and not very big. Over the course of his two-month search he saw a lot of the same thing — not much space for a lot of money.
“I probably looked at between 200 to 300 listings online, some ranging between $2,000 to $2,500, but I just didn’t see the value. The problem with downtown condos is that often the second bedroom is very small. I wouldn’t live in some of the smaller bedrooms in these units,” he says.
Kashvin was looking for something with a slightly lower monthly rent that he could share with a roommate but still live in a good building with a demographic that met his — young, single working professional.
Then he stumbled upon Maple Leaf Quay, a 23-year-old rental 21-storey building located at 350 and 390 Queens Quay West at Spadina, with views of the waterfront.
He discovered that for $1,700 a month he could have a two-bedroom init with a solarium.
He was also motivated by an incentive program the building manager offered him — if he signed a one-year lease before Dec. 31, he had a chance to win a $3,000 Air Canada flight voucher for a vacation.
Offering prospective tenants an incentive to sign is something Maple Leaf Quay has used for years to attract new renters, especially in winter months when they know people are less likely to want to move. Last year, the building management gave away a Smart Car in a similar promotion. As the condos continue to go up along Queens Quay and the market becomes more competitive, home ownership becomes a real option for those who may be looking to rent.
“We’re surrounded by construction down here. There are new condos being built all the time and new units also coming up for rent every day in this area,” says Christina Medeiros, leasing and marketing manager for the building.
A one-bedroom plus sunroom unit at Maple Leaf Quay starts at $1,249 and two-bedroom-plus sunroom units start at $1,599.
While Kashvin found an abundance of units in Toronto’s downtown, that doesn’t seem to be the case on the lower end of the rental scale, according to a Canada Mortgage and Housing Corp. (CMHC) study released Dec. 14, which indicates rental vacancy rates in Toronto have gone down again this year.
The report states that the average rental apartment vacancy rate in Canada’s 35 major centres decreased slightly to 2.6 per cent in October 2010 from 2.8 per cent compared to last year, according to the Rental Market Survey issued by CMHC.
The report pointed to the economic recovery that has taken place over the past year as one reason for boosting demand for both rental and ownership housing.
According to Bob Dugan, chief economist at CMHC’s Market Analysis Centre, other factors such as immigration, are also at play.
“High levels of immigration have supported demand for rental housing, thus pushing the vacancy rate lower. In addition, improving economic conditions have likely boosted household formation, which, in turn, has added to the demand for rental housing. These two factors combined, have put downward pressure on the vacancy rate,” said Dugan.
That being said, a recent report from the Federation of Rental Housing Providers indicates that immigration to Ontario is actually on the decline and is quickly becoming the most important factor impacting rental demand in Ontario. While 75 per cent of immigrants rent when they first come to Canada, the FRPO says 90,000 people left Ontario between 2003 and 2009, choosing to find work in Alberta, B.C. and Newfoundland.
“Many people think immigration is increasing,” says Mike Chopowick, manager of policy with FRPO. “It’s actually down — and new immigrants are choosing other provinces to work and live in, and as immigration drops, so do the vacancy rates. This is a huge issue when you consider all new rental demand will be influenced by immigration.”
The average two-bedroom rent in Canada was up from $836 in 2009 to $860 in 2010. The highest average monthly rents were in Vancouver ($1,195), Toronto ($1,123), Calgary ($1,069), Ottawa-Gatineau (Ontario part, $1,048), Victoria ($1,024), and Edmonton ($1,015). Of all the major centres, only these six had average rents at or above $1,000.
Year-over-year comparisons of average rents can be slightly misleading because rents in newly built structures — such as the condos Kashvin saw in his search — tend to be higher than in existing buildings. According to CMHC, by excluding new structures and focusing on existing structures in both the October 2009 and October 2010 surveys, it provides a better indication of actual rent increases paid by tenants.
For Kashvin, his decision came down to the right combination of price and amenities. While Maple Leaf Quay doesn’t have a pool, the building’s amenities do include Jacuzzis, saunas, rooftop patios with BBQs, a gym, media room, conference room and some retail stores.
“I really like the location, it’s on the lake and I have a southeast corner unit with a view of the CN Tower and Rogers Centre. It has the condo look but it’s an apartment building. There’s parking and an LCBO nearby,” he says.
So while Kashvin’s two-bedroom apartment is priced $577 above the average rent for Toronto as determined by CMHC, he says he’s getting location for that additional price and value in the amenities offered in the building.
“I think $1,700 is a sweet spot for this area,” says Kashvin. “You get the right demographic in the building, and location, but the price isn’t as high as some of the newer condos. You also get a property manager on site 24/7— when you’re renting from a private condo owner, if you have issues, you may have to wait a while before you get a response.”