Every single month, without fail, I receive a phone call or an email from a client asking about a recent correspondence with an existing tenant.
And what do these tenants want, you ask?
All of them.
What began during the pandemic last year when an unimaginable number of Torontonians found themselves laid off or with hours cut back, thus unable to afford rent, has now turned into an opportunity, in my opinion, and I’ll go as far as to say that many renters are simply being opportunistic, twelve months after the pandemic began, with many of them gainfully employed.
Some see this as a chance to stick it to the hot Toronto real estate market, or sky-high rental prices, or their landlord, or all of the above.
Others are simply hearing about how friends or colleagues benefited, and are looking to “get theirs.”
A reader called me last week and said he was getting $3,200 per month for his condo and that the tenants had asked if they could get a rent reduction………to $2,500.
I’m sure there resources out there that would suggest rents are down by 22% in some places. Like I always say, you can make numbers say anything you want.
I tell every one of these clients, readers, and callers the same thing: that in today’s world, a renter can stop paying you, and you’ll never get them out.
So what’s the upside versus the downside?
I know that you don’t want to think that people have this in them, but some do. And you don’t want to believe me when I say this, but really, truly, if a renter stopped paying rent tomorrow, you’re going to have a long, uphill battle ahead of you, no matter the “merits” of the case.
A “family friend” of mine is a social worker and it’s her job to provide assistance to those in need, as determined by her employer. One of the persons in need is an individual who is on government assistance, with obvious mental health issues, and who is currently going through an eviction process. This person has not paid rent in thirteen months and has been evicted by the owner of the property who had bought the property two years ago to renovate and live in as a primary residence.
The eviction application was heard on Tuesday, virtually, and the tenant had a representative from the Legal Aid Society, and the owner of the property represented themselves. The legal aid representative pointed out one small typo on the eviction application – 2020 instead of 2021.
The legal aid representative suggested that this invalidated the entire application.
The adjudicator agreed.
Well, that’s not the government’s problem, is it?
My point is this: owning real estate as an investment can be extremely lucrative, but it’s not for the faint of heart. More to the point, the current legislation and the climate at the Landlord & Tenant Board is completely and utterly in favour of the tenants, and you need to do an absurd amount of diligence before signing that lease agreement.
When you have a tenant asking for a $100 rent reduction, don’t fight it. Just go with it.
Maybe that’s part of the reason why rents are down in Toronto?
Topic for another day, perhaps.
Today, I wanted to look at listing and leasing activity in the downtown Toronto condo market so far in 2021.
We’re only 2 1/2 months into the year, and since we don’t have a full month’s worth of data for March, I can only provide you with an analysis for January and February. But I think that, given the data I’m about to present, the conclusions that could be drawn from two month’s worth of data is certainly worth sharing!
Recall that I had featured this data in mid-2020 as we were heading out of the worst of the pandemic, and then came back to it in November.
Let’s continue with the same data set, all the way back to 2018! It certainly puts our market in perspective.
Here’s an updated look at condominium lease listings in the downtown core of C01 & C08:
Let’s start by looking at January.
We see a 36% increase in new listings over 2021, however, that number pales in comparison to where we finished 2020.
December saw a 95% increase, year-over-year.
November checked in at 108%.
October was 144%, and September was 159%.
It seems to me that the 36% increase in new listings in January, year-over-year, pointed toward a massive drop in inventory.
And then came February!
We actually saw fewer new listings in February of 2020 than in 2021. How about that? Only a 12% drop, but considering we were looking at year-over-year increases averaging 126% from September to December, this has to come as a shock, right?
I triple-checked that data, and it’s accurate.
Condo lease listings in February absolutely plummeted and I have to wonder where this will leave us in March.
Remember how crazy lease listings were in 2020? How they looked on a chart? I wonder too what this will look like in March:
Listing activity tells half the story.
Leasing activity tells the other half.
We finished 2020 strong with 1,942 leases in the downtown core, representing an absorption rate of 71% (more on this later), and then came the surge in January: 2,103.
Compared to December, that’s nothing.
Compared to January of 2020, that’s a whopping 104% increase, year-over-year.
The increase from January 2020, over 2019, was only 8.3%.
Just look at the first two months of 2021 and tell me that those figures don’t seem outlandish to you:
From 2018, to 2019, to 2020, we see a gradual, modest increase in leasing activity in January and February.
In 2021, we see activity doubling.
Is this pandemic-related? Can it be?
Are these all the people who wanted to lease in 2020, but didn’t?
Did they all have the same New Year’s Resolution?
The above chart doesn’t do the story justice quite like this graph:
See that yellow line? The one that looks like a mistake? It’s not. It’s 2021, and it’s really, really out there!
That was what prompted me to write this post today. That single, two-centimetre yellow line. That’s the type of outlier that gets me excited. Where there’s an outlier, there’s a story!
Then again, look at how that grey line, representing 2020, compared to 2019 and 2018 from August onward. That’s really, really out there too. Perhaps January and February were just picking up where 2020 left off?
I shudder to think that we could see 2,300 or 2,400 leases in March, but it could happen, if these trends are any indication.
And what will that do to prices in the months thereafter? Well, in theory, it will push them up.
Let’s not forget that once upon a time, we were seeing multiple offers in the lease market. I had it happen on a few listings last year, but those listings were at lower prices than in 2019. I’m not trying to present a bullish argument about rental prices here. I have no horse in this race. But I’d be remiss if I didn’t point all of this out.
That brings us to the lease absorption rate, which did something funny in February:
Yeah, that’s 123%.
More properties were leased than were listed for lease, which sounds impossible, but for those not in the know – this includes properties listed in December or January that were leased in February.
That’s only the second time in the last 3-plus years that we’ve seen an absorption rate over 100%, and it’s the highest in any individual month.
The trend toward this outrageous figure began in October. Note that the 2020 absorption rates trailed 2019 significantly, year-over-year, until October when the pace fell to 10%. In November, the year-over-year absorption rate was actually higher by 2%, and then it shot up to 12% in December.
That increased to 25% in January (the math isn’t wrong above – those are rounded from 49.74% and 74.49%), and then shot to a whopping 68% in February.
Once again, I present a yellow-mustard outlier:
Two months into 2021; would you call this an “outlier” or would you call it a “trend?”
Answer that question, and you’d be equally as likely to be guessing as you would be predicting based on the preceding stats…Back To Top Back To Comments