Toronto Rentals are in High Demand

Rental Vacancy rate has dropped to 1% in Toronto. Most affected are one-bedroom and one-plus-den units. The latter have been investors' preferred buys because they can handle two tenants willing to split the rent.

By comparison, a 645-square-foot one-bedroom suite now goes for between $1,450 and $1,650 a month on the rental market and there is no shortage of takers. The only area where the condo rental market still offers a reasonable supply of suites is larger units. But, at the same time, an 880-square-foot, two-bedroom suite can run anywhere from $2,000 to $3,000 a month. They will start coming onto the rental market towards 2009 or 2010.

The numbers just don't make sense any more for most small investors. A 750-square-foot, one-bedroom-plus-den condo can bring anywhere from $1,750 to $1,900 on the rental market. The reason is the cost of that condo based on the $545 a square foot being charged for new projects is $408,750. That means an investor has to pay over $82,000 in cash as a 20-per-cent down payment and take out a mortgage for about $327,000. The problem is, $1,750 a month in rent covers only payments on about $280,000 worth of mortgages. In addition to the monthly maintenance costs of perhaps 45 cents a square foot, or about $338 a month.

Rising condo prices have made it near impossible in many parts of the Greater Toronto Area for investors to cover costs through rents. We forsee continuing shortage of Rentals in 2009 and 2010.