Downtown Condos Rents Roaring Back

A major concern that the industry has had for nearly a decade is that the pace of new condo price growth has far exceeded condo rent growth.

The chart below looks at the average price for new condos in postal codes M5A and M5V in Toronto (Downtown East, King West, Entertainment District), as well as the average rent per-square-foot for a sample of condos for lease in those postal codes via data from Rentals.ca.

At the start of 2020, prior to the pandemic, condos for rent were going for about $3.90 psf on average in these areas. Rent fell a whopping 20% over the next year, while new condo pricing stayed constant at $1,320 psf (there were a limited number of launches).

Since February, the average condo rent has increased by 13% to $3.50 psf, while condo prices have increased by 6% to $1,396 psf.

A 500 sf unit at $3.50 psf is $1,750 per month. When just looking at the mortgage payment of a 500 sf unit at $1,396 psf, before the condo fee, taxes, insurance, etc. is added, that equals about $2,425 per month at 20% down.

How much longer can the disconnect between rents and prices go on, or is this the new normal? Do you think that we will never have any relationship between the two measures moving forward? We’d love to hear your thoughts.