The New Rental Frontier
Condo owners who can’t sell their units are morphing into landlords to ride out the storm. The good news? The rental market is hopping By Bert Archer
People have been predicting the collapse of the condo market since well before the crash. Toronto couldn’t possibly sustain its rank as the biggest condo city in North America, the thinking went. With thousands of units coming on the market every year—11,500 in 2008 alone—surely there would be a glut. It wasn’t pure paranoia. We’d been here before, when the speculation-crazed ’80s gave way to the sober ’90s. According to Jane Renwick of Urbanation, which analyzes the condo market, average per-square-foot prices for new condos dropped 40 per cent between 1989 and 1993.
But every recession has its silver lining, and these days condo owners who are willing to become landlords are making a good buck renting out their properties. Historically, when sales drop, rents shoot up. In 1989, the Toronto average was $584 a month. When the market started its rebound, it was $743. Wallace MacDonald, a retired salesman, has been in the condo game since 1980 and now owns 80 units. January and February were big months for him. Eight condos he’d bought back around 2005, pre-construction, were becoming available at once. Instead of attempting to flip them, he advertised them on the renter mecca viewit.ca and found tenants for all within 10 days. “It’s easier to rent now,” he says, “and for good money.”
The numbers bear him out. This past October, average rents for purpose-built apartments topped $1,000 for the first time in the city’s history (rents for condos skew even higher). And vacancy rates, which have been falling steadily since 2004, were down to 2.1 per cent, the lowest October since 2001. Glut? What glut? There’s a healthy symbiosis between wannabe landlords and reasonably flush tenants that could be of mutual benefit while weathering the storm. Condos tend to take up the middle range of the rental market, occupied largely by young professionals with a yen for downtown living. The very people, in other words, who before the market went sour would have been buying those condos. Now, worried about equity erosion, 2007’s buyers have become 2009’s mid-range renters.
Evan Thomas, a 31-year-old lawyer at a big Bay Street firm, just decided to rent in a tower on Wellington. “I’ve been talking to my colleagues,” he says. “These are people a couple of years out of law school, employed, making pretty good money, and no one wants to buy a condo, then lose 20 per cent of its value in two years.”
For the better part of the boom, the fever to buy was like a pandemic. Renting was something we did until we could afford to buy—or (as was often the case) until we bought something we couldn’t afford. Now it’s not only a viable alternative to buying; it’s where the smart money seems to be going. This may be the beginning of the end of the homeowner imperative.
People have been predicting the collapse of the condo market since well before the crash. Toronto couldn’t possibly sustain its rank as the biggest condo city in North America, the thinking went. With thousands of units coming on the market every year—11,500 in 2008 alone—surely there would be a glut. It wasn’t pure paranoia. We’d been here before, when the speculation-crazed ’80s gave way to the sober ’90s. According to Jane Renwick of Urbanation, which analyzes the condo market, average per-square-foot prices for new condos dropped 40 per cent between 1989 and 1993.
But every recession has its silver lining, and these days condo owners who are willing to become landlords are making a good buck renting out their properties. Historically, when sales drop, rents shoot up. In 1989, the Toronto average was $584 a month. When the market started its rebound, it was $743. Wallace MacDonald, a retired salesman, has been in the condo game since 1980 and now owns 80 units. January and February were big months for him. Eight condos he’d bought back around 2005, pre-construction, were becoming available at once. Instead of attempting to flip them, he advertised them on the renter mecca viewit.ca and found tenants for all within 10 days. “It’s easier to rent now,” he says, “and for good money.”
The numbers bear him out. This past October, average rents for purpose-built apartments topped $1,000 for the first time in the city’s history (rents for condos skew even higher). And vacancy rates, which have been falling steadily since 2004, were down to 2.1 per cent, the lowest October since 2001. Glut? What glut? There’s a healthy symbiosis between wannabe landlords and reasonably flush tenants that could be of mutual benefit while weathering the storm. Condos tend to take up the middle range of the rental market, occupied largely by young professionals with a yen for downtown living. The very people, in other words, who before the market went sour would have been buying those condos. Now, worried about equity erosion, 2007’s buyers have become 2009’s mid-range renters.
Evan Thomas, a 31-year-old lawyer at a big Bay Street firm, just decided to rent in a tower on Wellington. “I’ve been talking to my colleagues,” he says. “These are people a couple of years out of law school, employed, making pretty good money, and no one wants to buy a condo, then lose 20 per cent of its value in two years.”
For the better part of the boom, the fever to buy was like a pandemic. Renting was something we did until we could afford to buy—or (as was often the case) until we bought something we couldn’t afford. Now it’s not only a viable alternative to buying; it’s where the smart money seems to be going. This may be the beginning of the end of the homeowner imperative.
posted by GP at
2:42 PM
0 Comments
