According to a new report by Urbanation, a real estate consulting and market research firm, the average rent in the city jumped by a record rate of 11.7 per cent year-over-year in the fourth quarter of 2016, thanks to a shortage of listings.
This marked a “dramatic acceleration” from the same period last year, which saw rates jump by 4.2 per cent.
On the back of this spike, monthly rent for a typical 719-square-foot unit reached nearly $1,990 in the Greater Toronto Area.
Rents saw the biggest rise in Toronto downtown core, as the average price for a condo was $2,134, up 12 per cent from the fourth quarter last year.
Meanwhile, the average rate in the suburbs of Etobicoke, North York and Scarborough rose by seven per cent to $1,857. Rent in the 905-region was also up six per cent to $1,739.
The data, which was released Monday, indicated that rents have climbed, in part, thanks to rising resale prices for condos, which jumped 15 per cent during the same period, enticing owners to sell their units rather than use them as rentals.
At the same time, Urbanation said that there has been less turnover as fewer renters have been willing to move as they take note of the high cost of renting in the open market.
Urbanation said the number of condo units in the GTA that were rented through the Multiple Listing Service system in 2016 declined for the first time since it began tracking the data in 2011, falling 2 per cent to 26,602 units.
The real estate research firm also noted that the share of the total inventory of rental condos dropped from 9.3 per cent in 2015 to 8.5 last year, while units that were resold climbed from 7.1 per cent to 8.1 per cent.
This trend was particularly evident in the fourth quarter of 2016 as final closings for new condos surged by 34 per cent year-over-year, while total rental listings fell by 8 per cent, dragging down lease volumes by 4 per cent annually.
“The undersupply of rentals in the GTA continued to worsen throughout the year, causing rents to surge alongside home prices and further deteriorating housing affordability across the region,” wrote Shaun Hildebrand, Urbanation’s senior vice-president.
Occupancy delays for condos under construction also contributed to the slowdown in rental activity, according to Urbanation.
The growth in renters also seems to be spurring developers to build rental units, rather than condos.
Urbanation found that applications for rental apartments jumped by 7,586 units in the fourth quarter to 27,812.
Despite this upcoming boost in stock, Hildebrand said there needs to be a greater focus on developing rental units.
“While less pressure on rent growth may arrive in 2017 due to a temporary rise in new apartment completions, it (has) become clear that more attention needs to be paid to building rentals over the longer-term,” he wrote.
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