The 1 big difference between the Toronto and Vancouver condo markets for Investors
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Speaker 1: Now, I do want you to look at this article here from the CBC. The headline is, “New year, same old expensive rent in Toronto. Why aren’t we fixing this?” “New report says average rent for one bedroom in Toronto is now over $2,000 higher than Vancouver.” That was really the kicker that a lot of people picked up on this past week, is this idea, perhaps, that Toronto is now more expensive than Vancouver as a city to rent in.
The data once again comes from PadMapper and, again, because PadMapper is an aggregator, it’s pulling data from other websites out there. It’s not necessarily the Bible for all things rental, but they certainly are a good site to look at. Anytime I see headlines related to PadMapper data, again, I just wanna put the disclaimer out there for all the investors watching to take this data with a grain of salt. It is useful, it certainly is interesting to look at, but this is not something coming from Urbanation or CMHC or the Toronto Real Estate Board where the data is much more robust, you could say.
But that being said, it is very interesting to note that the rental prices have gone up so much in Toronto that we are, perhaps, on a similar level, maybe above, maybe below, the city of Vancouver. But I think the point that I wanna bring to you as a condo investor is that even if our rents are higher than Vancouver, the price to rent ratio, the price that you have to pay for a property versus the rent that you’re gonna get on it, that ratio is much better, much more investor-friendly, in Toronto than it is in Vancouver.
This is something that we’ve talked about on the podcast in the past and I’ve interviewed other colleagues and people from Vancouver in the past and in conversations with them, the thing that they’re most surprised about when they look at the Toronto market is, “Wow, you can get really high rents here compared to the price you’re paying.” In contrast, in Vancouver, you’re getting a much lower rent compared to the price. You’re paying a much higher price. It all adds up to much better cash flow, much better ROI, in Toronto than you’re gonna get in a city like Vancouver.
The reality is that it’s another reason why I believe that prices have a lot of room to grow still in Toronto. We are still maturing as a city. When you become more of a global city, like a Vancouver, like a New York, like a Hong Kong, and other cities, London, like that, what you find a similar pattern is that the cash flow situation, the ROI, the cap rate, depending on how you wanna define it, how you wanna look at it, it gets worse and worse and worse as you go into the more major and major cities and vice versa.
If you go into the smaller cities and smaller towns you tend to get better cash flow, better cap rate, and so on. All in all, the ROI, the potential for investors, is still very, very strong in Toronto, especially when compared to any other city in Canada. I do believe that Toronto and the core of Toronto is still the absolute best place that you can invest your money in 2018.