Let’s First Look at 2019 Q4 Rental Market Performance
As per TREB’s 2019 Q4 Rental Market Report, there were 6,758 condo apartment rentals through the MLS® System. This is up by 11.8% compared to same time in 2018. At one point, the number of condo apartments listed for rent during Q4 2019 was up by 35.6% compared to Q4 2018.
Average condo apartment rents were up for one and two bedroom units. The average 1 BR condo apartment rent was $2,209 in Q4 2019 which is up 3.1% compared to Q4 2018. The average 2 BR condo apartment rent was up by 3.4% over the same period to $2,868. According to TREB, the average rent growth moderated closer to the rate of inflation.
Could Mississauga Rents climb by 8% in 2020?
Rentals.ca recently put out a rental report that suggests that rents could climb by 8% in Mississauga at the end of 2020 ($2,585 per month on average), with rest of the country estimated at only 3%.
According to the report, Mississauga finished sixth out of 34 cities for average monthly rent in November 2019 for 1 BR units at $1,934 and fifth for a 2 BR units at $2,416.
The rising cost of home ownership is discouraging hopeful home buyers who are adding pressure on the rental market. The rental market has not been keeping pace with the rising demand. According to the Canadian Rental Housing Index, 46% of Mississauga households are spending over 30% of their income on rent and utilities, the report adds.
As affordability remains a major issue, developers, government, and other stakeholders need to think collaboratively to find solutions to higher rental demand from newcomers, people on work permit, millennials, first time home buyers and downsizers.
Mississauga has taken some steps to protect its rental inventory as part of “Making Room for the Middle housing plan”. The city’s bylaw requires developers to obtain a new permit in order to convert existing rental units to condo units or demolish rental units. The permit could be withheld if the developer wishes to convert or demolish six or more existing purpose-built rental units, the city’s rental vacancy rate is below 3% (the current overall vacancy rate is 0.8 per cent) or rents are 1.75 times average market rent or lower.
Our two cents on the 2020 Rental Market Outlook
While there are a lot of facts and useful information in this report, we do not agree with an 8% increase in Mississauga rents in 2020. Market statistics presented in formal reports need to be taken with a grain of salt. Nothing can beat the local experience that Realtors bring to the table. Working in the local Mississauga market day in and out, we have our finger on the pulse of the market and can provide our clients with a more realistic expectation based on local market trends, down to specific areas and even condo buildings.
There is a plethora of listings on the market. We can see rental rates come down considerably as a result of inventory oversupply. And this trend can continue if newcomers are slow in coming to Mississauga in the next few months. It is a great time to get into rental market as the rents are down and it hurts a landlord to keep the property vacant.
Rental Market Analysis
One bedroom units were recently (early to mid 2019) renting at $2,100 per month. But beginning October 2019 the market has produced many 1 BR and 2 BR listings. As of Jan 23, 2020, there are over 250 active listings for rent in City Centre, Hurontario, Central Erin Mills and Erin Mills neighbourhoods on TREB MLS System.
If a landlord is adamant to receive higher rent then it can take a much longer to lease the unit. If a property remains vacant for two months without any tenant, and then eventually rents at $1,900 then he would have have lost two months’ rent; that is $3,800 or some $316 per month. If you subtract this amount from the annual rent, then in truth, the unit’s rent works out $1,584 (due to two months vacancy loss). So it does not makes no sense to wait and lose more rental income.
Smart landlords understand and work with the market realities and accept rents which the market will give. Our landlords use this strategy because we help them understand the rental market, which is very fluid and is constantly changing. We put our best efforts not only when buying or selling properties, but also when listing our clients’ investment properties to match the right market value.
This helps our landlord clients to stay rented rather than to be vacant for months. At this moment, 1 BR which used to rent for $2,100 is now are renting around $1,950 in the month of January 2020. 2 BR which was renting for $2,600 is now renting for $2,400-$2,450. So we are in a market where there are many listings, and rents must be adjusted to stay ahead of the game.
What does 2020 look like
In fact this situation might not change soon. The rental market will ease off because so many other new buildings are coming to Square One and other parts of Mississauga, including Erin Mills and Hurontario. These areas will produce many buildings which will increase the housing rental supply in the market and depending on the influx of newcomers or from renters from existing market, rents will be steady and may not see a huge jump in 2020. For landlords, the Mississauga real estate investment market is still very lucrative and a healthy income-generating opportunity.