Condominium vacancy in the Greater Toronto Area (GTA) slipped to 1.1% in 2022, according to a report released Thursday by the Canada Mortgage and Housing Corporation (CMHC). That figure was down from the 1.6% seen in 2021 and below 2022's national condo vacancy rate, which also came in at 1.6%.

It’s no secret that rental demand in the GTA escalated in 2022 in tandem with rising interest rates that put borrowing costs through the roof and caused home-buying ability to plunge. For condo rentals specifically, CMHC points to “strong demand from higher-income households,” including young professionals in high-income sectors such as technology and finance.

“[Condos] certainly fulfill a gap. If we didn't have them, we'd be in a bigger supply crunch than we're at right now,” says Dana Senagama, CMHC’s Principal Market Analyst for the Greater Toronto Area and Ontario. “Of course, the caveat to rental condos is that they're a lot more expensive.”

In fact, the GTA's average condo rent price was 50% higher than that of purpose-built rentals, according to CMHC’s data.

RELATED: GTA Saw Strong Increase in Rental Supply in 2022, But At Prices 45% Above Average

“You had a substantial increase in the number of new tenants in the market, which we've always had, but last year, it was an even greater number and a greater lack of inventory,” says Andy Taylor, Senior Vice President of Sales at Sotheby’s International Realty Canada. “Supply and demand dictated where rental prices went.”

Although CMHC says that GTA rental stock growth was led by condos -- with around six condos completed for every one purpose-built rental -- condo completions were down by 23% in 2022, coming in at just under 17,000 units. CMHC attributes this to supply-chain issues and labour shortages, which weighed heavily on productivity in the construction industry.

At the same time, the GTA saw an uptick in investor-owned condos entering the rental market. The share of apartments held by long-term investors grew to 36.2% in 2022, up from 34.7% in the year prior, according to CMHC’s data. This was partly due to short-term investors who bought pre-construction units with the intention of selling, but opted to rent instead.

“They were getting multiple offers. They were getting very good rents and people just decided that it was a better option for them to rent the unit rather than looking at selling," says Taylor. “It was almost like the frothiness of the resale market in 2021 turned into a frothiness in the rental market in 2022."

Although these types of units rented at a premium, Taylor says he saw no shortage of renters that were willing to pay that price, including would-be homebuyers who were “waiting to see what happened with the market.”

He anticipates the GTA will continue to see an extremely tight condo rental market as 2023 progresses -- at least until new condo supply comes online in a meaningful way.

“Just this past month, I've had a number of transactions over $10,000 in rentals. I had three offers on a rental of $17,500 just last night. The demand is in the regular part of the market and the luxury part of the market. I think we're gonna continue to see that this year.”