High flat vacancies in Canada put tenants in control
With apartment vacancies higher than they have been in more than 30 years, landlords in Toronto, Canada's largest real estate market, are scrambling to attract renters.
A landlords' market has suddenly become a tenants' market, and prospective tenants are finding themselves wooed by everything from an order of free pizza to three months' free rent.
The recent boom in the construction of condominium and apartment buildings has dramatically changed Toronto's real estate market in recent months.
After years of low vacancy rates - less than 1 per cent during the late 1990s - vacancies have been climbing steadily as low interest rates encouraged builders to build faster than the market could digest.
The vacancy rate in Toronto is expected to hit 4.8 per cent this year, and edge towards 6 per cent next year.
Landlords have realised they are not going to get new tenants unless they make the deal more attractive. The gift of free pizzas for new tenants on moving day is way down on the scale of enticements.
The result, said real estate market analyst Paul Fish, was that 'it's a great time to be a renter in Toronto'. Among the attractions offered by various landlords are three months' free rent, payment of moving costs, DVD players and plasma television and $500 shopping certificates.
Landlords have also been improving their buildings in the hope of attracting new customers and keeping their existing tenants, sometimes going as far as building saunas and fitness rooms.
One landlord admitted spending almost $10,000 on vacated apartments to attract new tenants.
'When you had four people lining up for every apartment, you didn't need to do these kinds of things,' Mr Fish said.
Tracing the change in landlord attitudes since the apartment market became increasingly overbuilt, Mr Fish said: 'Tenants are treated like customers now, when they were no more than a revenue source before 2001. We had such low vacancy it didn't matter whether you treated your customer well or not.'
For landlords, the bad news is that it will probably continue as a renters' market for perhaps another two years.
A report released this week by the TD Bank Financial Group points to the glut of condominiums on the market as the main reason for the high level of rental vacancies.
Low mortgage rates in recent years have meant that young people, especially, have opted to buy condominiums rather than renting apartments. The large number of condominiums has also produced a high level of units for rent.
Beata Caranci, a TD Bank economist, said: 'Although rising interest rates will erode home affordability and help stabilise renter demand for apartments, we do not expect a full-fledged recovery to take place until 2006.'