There were 31 per cent more condo units leased in the first quarter than a year ago, Urbanation found, and rents were up 4.4 per cent, a gentler jump from the 5.9 per cent increase that occurred between the first quarters of 2011 and 2012 but still a significant rise, said Pauline Lierman, Urbanation's director of market research.
The average rent was $1,856, or $2.33 per square foot, in the first quarter compared to $2.11 in Q1 2011.
That jump in rent of more than 10 per cent in two years is mainly a product of demand, with the most desirable units in downtown locations close to transit lines and amenities, Lierman said.
"The vacancy rate is barely over one per cent for rental condominiums," Lierman said. "The market has remained tight."
Investors who have bought condos are choosing to rent them out instead of selling them, Urbanation's senior vice-president, Shaun Hildebrand, said in a news release.
"For the first time in a while, rents are rising faster than prices," he said.
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New units going straight to rental market
Of the 773 new condominium units listed in Q1 2013, 13 per cent were rented out, versus four per cent of listed units in Q1 2012. Only two per cent of the new listed units were resold, down from 2.8 per cent last year.
"You're seeing a higher trading factor rather than a resale factor," Lierman said. "What you're seeing is more [units] are going into the rental market. These people may be investors or people who bought and aren't going to use their units and are not putting their units into the market."
Much of the increase in rentals in Q1 2013 is owing to the fact that more than twice as many condominium projects were completed that quarter than in 2012: 4,859 new units were registered in Q1 2013 versus 2,127 in Q1 2012.
Many of the new projects that came online in Q1 2013 were started in the volatile period of 2008-2009 and experienced construction delays because of the recession, Lierman said.
Tighter mortgage rules putting off buyers
Lierman says that another factor driving more people to rent condo units instead of buying them is the further tightening of mortgage rules last year, which shortened the maximum amortization period for government-backed insured mortgages and reduced the maximum size of home equity loans.
"The changes have definitely seen first-time buyers put off; they're renting," she said. "It's hard to quantify, but you can definitely see the resale market has slowed down throughout the latter half of the year. Even the new sale market slowed down. We were ahead of the year before during the first half of 2012 and then everything eased off. Prices have flattened out."