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Luxury rent in Toronto falls 4.8% in Q4



Luxury rental prices in Toronto experienced a notable 4.8% decline during the fourth quarter of 2023, surpassing decreases observed in the 10 major cities scrutinized globally, according to a recently released report by Knight Frank. The Prime Global Rental Index by Knight Frank disclosed an overall dip of 0.6% in luxury rental costs across the surveyed cities, marking the first quarterly descent since 2021.


Liam Bailey, a partner with Knight Frank and the global head of research, highlighted the persistent mismatch between the supply and demand in the luxury rental market, extending over three years. He emphasized that the luxury segment, much like other residential rental markets, grapples with affordability constraints limiting the tenants' ability to bid rents higher. This, coupled with a slight improvement in rental supply, serves to restrain the pace of rental growth.


Despite witnessing a prior increase of 3.7%, luxury rental prices in Toronto underwent a stark 4.8% decline in the fourth quarter, outpacing other cities in the study. The subsequent highest cities facing declines were Tokyo and New York, both experiencing a 2.5% drop in luxury rental prices.


Contrastingly, Sydney, Australia emerges as a standout with the most robust growth, boasting a four percent surge in prices during the quarter and an impressive 18.1% increase year-over-year. The report attributes the ongoing housing shortage in Sydney to limited new construction, exacerbated by challenges stemming from the pandemic. Additionally, a surge in demand triggered by a substantial increase in inward migration following a three-year lull further compounds the housing supply issue.


Delving into the local Toronto market, rentals.ca provides insights into the average rental costs. According to their data, the average monthly rent for a one-bedroom apartment in Toronto stands at $2,551, while a two-bedroom apartment commands an average monthly rent of $3,330. These figures provide context to the broader trends highlighted in the Knight Frank report, demonstrating the dynamics of the Toronto rental market amid the global and local factors influencing the luxury segment.


In summary, Toronto's luxury rental market experienced a pronounced decline in the fourth quarter of 2023, leading global cities in the magnitude of the drop. Affordability constraints, coupled with a modest improvement in rental supply, have restrained the pace of rental growth in the luxury segment. As other cities grapple with varying degrees of decline or growth, the Toronto market's unique challenges and trends contribute to the broader narrative of global luxury rental dynamics.


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