Are Toronto Renters Flocking to Mississauga?
Even though rental rates are high and vacancies are low in Mississauga, it looks like the city has become a viable alternative for renters who have been officially priced out of Toronto.
A recent Urbanation report has revealed that tenants, grappling with a red hot and staggeringly expensive rental market in the 416, are setting their sights on the 905. According to Urbanation, rental rates in Toronto hit $2,392 in the final quarter of 2017—a striking 12 per cent climb.
The price increases have everything to do with too little supply and increasing demand—a problem that also exists in some 905 cities. Although Urbanation names Mississauga as one city that’s attracting TO renters, recent reports released by the city also suffers from low inventory. In fact, a recent affordable housing report pegs the vacancy rate in Mississauga at 1.6 per cent (a healthy rate is three per cent).
That said, the situation is more dire east of the border.
Urbanation reports that condo rents, which rose nine per cent across the region in the last quarter of 2017 to $2,166 on average, are pushing tenants out of the downtown and into buildings in the 905 area. Its data on rentals leased through the Multiple Listings Service (MLS) also indicates that those who have an apartment are staying longer, meaning slow turnover is ensuring less units—even small ones—are available to new tenants.
Urbanation says the overwhelming majority of MLS leases are condos, which are believed to account for a third of the region’s rental stock.
“With rent levels rising downtown and more condo projects finishing construction in the suburbs — and those units being offered for rent — we are starting to see some tenants looking at alternative options and starting to migrate into the 905 region where rents are quite a bit less expensive,” said senior vice-president Shawn Hildebrand.
Urbanation says new condos are attracting renters to Mississauga, Vaughan and Oakville specifically.
The report reveals that rents in downtown Toronto rose 12.4 per cent in the last quarter of 2017 to an average $2,392 (or $3.37 per sq. ft.) In the less costly 905 region, prices grew only eight per cent to $1,867 (or $2.45 per sq. ft.).
While that’s still objectively costly, it is true that more budget-conscious renters will go to a city where rents are up to $500 cheaper. As far as unit types go, rental site Rentseeker says that tenants can expect to spend about $1,337 on a one-bedroom suite. The site indicates that two-bedroom units are still available for about $1,482 and three-bedrooms for $1,636 (keep in mind that these are aggregates and your mileage may vary).
Because of the price difference, the 905 is becoming increasingly more popular.
Urbanation says the GTA saw a 26 per cent increase in the number of leases in the final quarter while leases dropped sharply in Toronto.
“We’ve seen previous quarters where activity has slowed down, but we’ve never seen a drop to that magnitude and it was primarily a supply issue,” said Hildebrand. “We saw fewer projects come to completion last year and that was probably one of the biggest drivers.”
Hildebrand expects rents will continue to increase this year, perhaps by four to five per cent. Urbanation also expects the low turnover to continue when rent controls come into effect in new buildings in the spring.
“In the fourth quarter, the average duration of a tenancy was almost 23 months — almost a full month longer than the previous quarter of 2017,” the report reads. “Tenancy periods rose almost three full months compared to the end of 2016 and about six months compared to 2015.”
Hildebrand says that reduced turnover along with fewer construction completions is creating a situation where “the market has tightened severely against a backdrop of extremely high rental demand in the city.”
Mississauga’s rental market might also get tighter not just because it’s more affordable for tenants, but because even more prospective homebuyers will be priced out of the market in the wake of the new OSFI stress test (a test that will require borrowers to qualify at higher rates).
Increases in interest rates could also scare a few more people away from buying.
“This is happening at the same time as employment is surging, population growth is extremely strong,” Hildebrand said. “It creates a lot of pressure on the existing stock of rentals and there’s going to be continued downward pressure on vacancy rates.”
With Mississauga welcoming more condos and moving to protect and enhance its rental stock, the city could be in a good position to welcome an influx of renters—but it might struggle to do over overnight.
It’ll be interesting to see what happens to the city’s rental market going forward.