While industry analysts, economists and, even, CREW online have all argued an explosion of condos has put pressure on landlords to lower their rents, a new poll suggests those property owners aren’t quite as sure.
A whopping 70.3% of real estate investors say they have not dropped their rents by so much as a dime in order to win or retain tenants increasingly spoiled for choice in markets such as Vancouver and Toronto.
Still, there are signs that other landlords are having to make some compromises because of the growing inventory of condo units in their markets. In fact, those compromises tend to be bigger rather than smaller.
Of the 118 responding to the survey last week, 5% said they’ve recently had to lower their rental expectations by less than 2% “in order to win a tenant in this renter's market?”
But some 11% said they recently lowered their advertised rents anywhere from 2% to 5%, with nearly 14% dropping their expectations by more than 5%.
That, at least, jives with what GTA property investors are telling CREW Online, as they cede to the pressure to cut rents in exchange for longer leases.
They’re “worried about vacancies because of flood of properties, mostly condos, expected to come into the market,” said Steve Arruda, a Toronto real estate investment specialist with Century 21. They’ve decided to take a bit of a rent drop in order to ensure occupancy and maintain cash flow.”
The analysis comes on the heels Central Bank warnings that condo markets across the country are most vulnerable to a correction.
“Certain areas of the national housing market may be more vulnerable to price declines, particularly the multiple-unit segment of the market, which is showing signs of disequilibrium,” reads the Bank of Canada’s December economic review, issued Thursday. “The supply of completed but unoccupied condominiums is elevated, which suggests a heightened risk of a correction in this market.”
With a building crane seemingly on every downtown corner, Toronto tenants are already showing more willingness to ask for rent reductions in exchange for longer leases.
A grow number of landlords are ready to make that compromise, not only because of the tens of thousands of new condo units likely to hit the rental market by the end of 2012, but also because of a possible increase in the number of renters willing to make the leap to homeownership.
Those property investors may – if only for now – be in the minority.
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