It’s not often we witness a declining rental market, but here we are. And, despite popular belief, even the unstoppable Toronto real estate market is susceptible to downward pressure.
COVID’s (indirectly) the Culprit of a Declining Rental Market
How has COVID impacted the real estate market? As we predicted, COVID didn’t slow the market; in fact, in many cases, it was the root cause of a surge in buyers, multiple offers, and increased selling prices, but it left a negative impact in its wake. The pandemic closed offices, forcing people to work from home and kids to learn virtually, it resulted in needs, wants, and priorities to shift.
Small, conveniently located condos in Toronto were no longer convenient. There were limits to how many people could occupy an elevator at once, masks became mandatory, and in some cases, guests were being turned away. This, combined with new condos closing, caused a surge of rental properties to become available.
Many tenants no longer needed to stay in the City; they could move to the burbs or somewhere rural and work remotely. This move often resulted in little to no significant change in monthly expenses and sometimes even savings.
Now, landlords are confronted with tenants negotiating lower rates and vacant condos that they can’t afford to carry long without the rental income. Here are some tips on how to compete in a market with so much competition and declining values:
If a market is trending downward, you have to price a couple of weeks ahead –Adrian Trott
DON’T BE NAÏVE ABOUT THE RENTAL MARKET
You mustn’t value your property solely on a similar property that rented a few weeks prior. Just because your neighbour got $2,000 per month three weeks ago doesn’t mean you can get the same. You have to be aware of the changing dynamics of the market, your increased competition, and the rental market (this also applies when selling real estate).
DO BE PROACTIVE AS THE MARKET CHANGES
If a market is trending downward, you have to price a couple of weeks ahead. This means predicting where the market is going. If a similar condo rented for $2,000 three weeks ago and competing condos are now lingering between $1,950 and $2,000, the first person to realize that the value in today’s rental market is $1,875 will win. Even though this number seems low today, in six weeks, you’ll quite possibly be getting more than those who held out longer. Not to mention, you’ll collect rental income quicker.
DO MAKE YOUR RENTAL LISTING SHINE
Most rentals look like crap. They’re dirty, smelly, banged up, and it’s all highlighted through terrible ten-year-old smartphone photos.
Invest a bit of time and/or money to clean the unit and, perhaps some paint is called for also. CLEAN the condo, take proper photos, and consider virtual staging. You now have these photos forever to repurpose down the road.
When the pool of prospective tenants is dwindling, and the options for them to choose from is increasing, you need to give them a reason to consider your property.