After two years of record-setting property prices, Ontario’s real estate is again hitting new highs. 

This time, it’s the rental market – the cost of renting a condo in the GTA is soaring, according to the Toronto Region Real Estate Board (TRREB) which says average rents for one-bedroom and two-bedroom apartments have now surpassed their 2019 peak. 

With high demand and limited supply, renters can expect rising rates for the foreseeable future. But landlords should think twice before taking advantage of this trend – good tenant relationships are key to sustainable property management and squeezing desperate tenants can do more harm than good over the long-term.

Rent up, prices down

Average condo rents in Toronto were up by double digits annually for all bedroom types in the second quarter of this year, according to TRREB. The average one-bedroom rent increased by 20.2% year-over-year to $2,269 while the average two-bedroom rent rose 15.3% to $2,979.

In an attempt to keep costs down and offset the impact of inflation, the Ontario government has capped 2023 rent increase guidelines to 2.5% for 2023. 

Rent increase guidelines are the maximum a landlord can increase rent, without the approval of the Landlord and Tenant Board. Increases were frozen during the pandemic, but were reinstated in 2022 and are now on par with pre-pandemic levels.

Rents may be up, but prices are definitely coming down. In its most recent forecast, RBC predicted a 12% drop in house prices across Canada the second quarter of next year. 

What does this mean for landlords and property investors?

If you’ve been waiting for the real estate market to cool off, now’s your chance. Investors who bided their time during the pandemic boom-time, will now be rewarded with more palatable prices. 

With rents remaining high into 2023, being a landlord is a savvy move for anyone looking for a steady stream of passive income. And there’ll be no shortage of renters – Canada’s rising inflation rates are deterring many first-time homebuyers who just can’t afford to get into the market. 

Commenting on the housing forecast, TRREB President Kevin Crigger said: “Higher borrowing costs may have temporarily precluded home buying for some households, but the GTA population continues to grow alongside a booming regional economy. This means that an increasing number of people requiring a place to live will turn to the rental market.”

Finding good renters however, requires give and take. Landlords should resist the temptation to jack up their rents, especially above the LTB threshold. Not only is this illegal without LTB approval, it’s also a great way to ruin your relationship with your tenant, paving the way for future disputes.

If you’re a first-time landlord you may want to consider hiring a property manager. Working with a professional and experienced team like Highgate Property Management takes the stress out of tenant negotiations. 

Not only will we help you find reliable and trustworthy tenants, we can also advise you on what rent is appropriate for your unit – many new landlords undercharge and try to mitigate the shortfall later with an unwelcome rent hike. With our help, you can set the right rent from the outset so you and your tenants avoid problems down the road.

Contact Highgate today and enjoy all the benefits of being a landlord, without the hassle!