A significant contributor to the gloom is the almost-overnight collapse of Airbnb, which suffered much-reduced bookings once the coronavirus took hold of the global economy. The online lodging service has lowered its internal valuation from $31 billion to $26 billion, Business Insider reported in early April.
RE/MAX said that these developments have left Toronto’s landlords over-leveraged and susceptible to market volatility – a far cry from the pre-outbreak vacancy level of less than 2% and a monthly rent rate of $2,213.
“Many real estate investors were reaping the benefits of Airbnb-style short-term rentals, where the profit margin was so much greater than a traditional lease,” RE/MAX said. “With the closing of the US/Canada border and the imposed stay at home measures, the demand for short-term rentals disappeared overnight, and now some investors are left scrambling to find tenants for their vacant spaces.”
The market impact could also linger long after the crisis has passed, although pent-up demand might help stimulate activity during this phase.
“Since the closure of non-essential businesses across the city in late March, many tenants are struggling to make rent payments. This will inevitably put downward pressure on demand for a brief period of time, even after protection measures have been lifted,” RE/MAX said. “This extra supply flooding the rental markets, coupled with depressed demand levels, means there is potential for average rental rates to decline within the Greater Toronto Area. This anticipated drop in rent prices and competition may translate to a less stressful home search for new renters, post-crisis.”
MBN
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