Rent prices in GTHA keep dropping but that could change soon. Here’s why.

An exterior shot of an apartment is shown in Toronto on Monday, April 22, 2024. THE CANADIAN PRESS/Chris Young

Rents in the Greater Toronto and Hamilton Area during the first quarter of this year declined 2.2 per cent from a year ago, according to a report by real estate research firm Urbanation, which attributed the softening of the rental market to increased supply.

The report also found that average condo rents in the GTA declined on an annual basis for the fourth consecutive quarter to $2,612. Urbanation said condo rents are down 10 per cent from a record high of $2,925 set in the third quarter of 2023.

“The rental market is undergoing a period of improved affordability thanks to recent increases in supply. This is a good lesson that more supply can help bring down costs for renters,” Urbanation President Shaun Hilderbrand said in a news release.

The report said 2,136 units were completed in the first quarter of this year, a 173 per cent increase from last year and the second highest quarterly total of the past three decades.

“This was in addition to the record number of condo completions currently underway, adding to the growth in rental supply,” Urbanation said.

However, Hilderbrand warned that the trend is not expected to last much longer as a result of decrease in construction for purpose-built rentals and condos.

In the first quarter of this year, 731 purpose-built rental units started construction, a drop of 60 per cent from the same period last year, Urbanation said.

The report also noted the figure falls 41 per cent below the latest five-year average and is a nine-quarter low, with the 905 region seeing the most decline in construction volume. In Toronto, there are 16,459 units under construction, its lowest level since 2023.

Meanwhile, the report found that vacancy rates for purpose-built rentals were at 3.5 per cent in the first quarter of the year, up from 2.6 per cent from the same period last year.

Vacancy rates reached 3.7 per cent in Toronto and three per cent in the 905, Urbanation said. The report noted that studios saw the highest vacancy rate at 6.2 percent, while three-bedroom units remained lowest at 2.8 per cent.