TORONTO vs. THE WORLD – Rental Rodeo (Part 3)

Back in the day, just after finishing university, the first condo that I ever rented was at Yonge & Bloor. It was a 498 square feet 1-bedroom unit (as shown below) that was listed at $1,500 per month plus hydro.

I actually had to overbid at $1,550 to get the unit. I stayed there for a few years without the Landlord increasing my rent (at the time, landlords could increase rent by any amount they wish). A few years later, when I moved out, the rent for that unit was $1,850. In today’s rental market, that same unit could be easily rented out for $2,100, if not more. These rental rate hikes all happened within a few years. Given the lack of rental supply right now, don’t be surprised if we see similar yearly increases in the coming years.

Toronto is a great place to live and if you read the first 2 parts of my TORONTO vs. THE WORLD Insight Article series, you will understand why our City has grown so fast – in both the categories of average sale price and average rents. As a world class City, we are actually not that expensive in comparison.

The Rental Numbers are IN! In this week’s Insight Article, we will go over the rental numbers in Toronto relative to the rest of the world. Below is a chart that illustrates the rental rates of global cities in USD.

Source: Numbeo & Walletwyse

The table below essentially contains the same information as the chart above, but it breaks down the highest to lowest rental rates with Canadian pricing.

Toronto Power Rankings – The average rental rate for Toronto is only $1,450 USD or approximately $1,900 CAD. As such, this puts Toronto at #23 for the highest rent (globally). The interesting thing to note is that the rent-to-purchase ratio for Toronto falls within the top 10 – the table below highlights the average price per square foot that units are being sold at and compares this with the rental rates.

This means that the amount of money you pay to own is still relatively lower to the amount of rent that a property yields. Keep in mind that in some of these cities, the purchase price of a similar style property is 2-5 times the purchase price in Toronto. When the rental yields are high and the price points are low, from a global perspective, this will attract the foreign investors. Even if you add in the 15% NRST (foreign buyer tax), Toronto real estate is still a good deal compared to other global cities.

A Peek at New York – Since Toronto is constantly compared to New York, here is a detailed snapshot of the cost to rent a 1-bedroom unit in New York.

Source: Zumper

Note that the units in New York are smaller than they are in Toronto. To be in the financial district equivalent of Toronto, it would cost you $3,400 USD/month in New York. Comparatively, a 1-bedroom rental in Toronto’s financial district is about $2,200 CAD or $1,685 USD – that’s essentially half the price!

Undoubtedly, there is still room for growth in downtown Toronto despite what most people think. As more and more corporations and people flock to the downtown core and the area intensifies, the rental rates are going to increase. Combined with the high-quality immigration that Toronto receives, you’ll get a recipe that calls for an increase in real estate prices.

The Land of Many Opportunities – Take a look at PWC’s 2018 City of Opportunities chart below to see how great of a City Toronto has become.

Source: PWC City of Opportunities, 2018

Surprise, surprise – Of all the mega global cities, Toronto is ranked #1 in the affordability category. Furthermore, Toronto is ranked top 10 in most of the other categories. Toronto is ranked in the top 3 for ease of doing business, along with health and safety, a factor which is very important for people considering immigration to Toronto. Overall, across all categories, Toronto is ranked third for the best city to be in when it comes to having opportunities.

Affordability Affirmation – This study looks at other areas as well. Taking a look at the charts below, Toronto has a perfect score for quality of living and despite what we may think, we are still relatively affordable for housing. Additionally, our cost of living is still one of the lowest in North America.

Source: PWC City of Opportunities, 2018

Source: PWC City of Opportunities, 2018

The Wrap – We have covered off a number of topics in this TORONTO vs THE WORLD Insight Article series. Here is a quick recap of our City:

1. Low global purchase price
2. Massive high-quality immigration
3. Growing metropolitan area
4. Fourth largest population in North America
5. Lack of supply
6. The pace of population growth
7. Quality of life
8. Business opportunity
9. Health care and safety

With all of the above factors in mind, you can now see why Toronto checks almost all of the boxes for impending growth. As locals, we should be grateful that we live in one of the best cities in the world and as investors, we should appreciate the opportunity we have to snatch up real estate in such a fast growing market.

If you’re looking to add more properties to your portfolio or to get started with the best investment opportunity in Toronto, contact us today to see how we can help you realize your real estate goals!

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