Toronto rents are too...low

Are falling rents in Toronto a canary in the coal mine?

It’s common for politicians to take credit for growth, and Nova Scotia’s leaders have occasionally done that during the province’s turn-around decade. Or, if not due to personal charms of its leaders, then the rest of Canada must have discovered that they like the ocean the enough to live in Nova Scotia. I don’t buy it. My preferred cause of Nova Scotia’s population surge is an overflow from Toronto, or rather the GTA, or rather basically all of Southern Ontario.

The timing of this theory aligns well with interprovincial population flows, which turned on net slightly positive in 2016, then increased to a staggering 11,700 by 2022, before falling, especially in the last year through July 2024. It also aligns with the federal government’s track record on immigration, from “slightly beyond the major cities homebuilding pace” in 2015 to “far beyond the major cities homebuilding pace” by 2022.

After house prices - the biggest “pull” factor attracting Ontarians getting pushed out was lower rents. Pre-pandemic, a 1-bedroom apartment in Toronto would go for about $2,300, while in Halifax 1-beds were available for something like $1300.

The data here is spotty - at least publicly available data, and relies on me finding old editions of Rentals.ca’s rent report. Despite some gaps and limited sample size - its the best measure of units available to be rented at the time.

Toronto saw a brief - but glorious - drop in rents in 2020, as folks wondered whether the downtown would ever fill up again and (it seemed) every young Torontonian went to live at their parents lake house. But that was short-lived, as the re-opening of the economy, and of non-permanent resident flows hit Toronto with a vengeance. Rents soared from $1,800 to $2500 within about 18 months. But after ticking up to $2,600 in late 2023, Toronto rents have started to slide. They’ve now fallen below $2,400, and the trend looks bad for landlords.

Meanwhile, rents in Halifax spent most of those years increasing on a somewhat linear path (you need to be more careful because of the small sample - average asking rents bounce around a lot more here). And you’d really need to squint to claim a downward trend so far. The result is that the rental discount in Halifax is only ~17%, a multi-year low on par with mid-2021.

I’m still a believer that Toronto is not fixing its housing shortage any time soon. And that there are basically unlimited Ontarians who could be pulled east for cheaper living. But it probably needs to be (relatively) cheaper than it is today. If Toronto rents keep falling - I’d look for Halifax rents to as well.