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In the world of luxury rental markets, few have faster rising rents than Toronto, real estate consultancy Knight Frank suggests.

Luxury apartment rents in Toronto climbed 2.4 per cent annually in the first quarter of the year, according to Knight Frank’s Prime Global Rental Index.

That puts the city fourth on the quarterly index of 17 luxury markets in terms of growth, behind only Cape Town, Zurich and Guangzhou.

“As the population of Toronto continues to grow, the demand for rental apartments also continues to grow,” Taimur Khan, a senior research analyst at Knight Frank, tells BuzzBuzzNews.

“The supply of rental apartments has not kept up with this demand, hence we are still seeing strong performance in the market,” he adds.

List leader Cape Town posted year-over-year upscale rental gains 5.9 per cent. Knight Frank attributes this to migration inflows as new arrivals to the South African legislative capital are renting before taking the leap into ownership.

Over the same period, Zurich and Guangzhou saw luxury rents climb by 5.1 and 4.0, respectively.

Generally, Knight Frank considers properties to be luxury, or “prime,” if they are in the top 5 per cent by value in a market. The kinds of homes tracked vary from market to market, and Toronto’s rental index is based on two-bedroom apartments (both purpose-built units and condos for lease).

Toronto’s prime rent gains, although among the highest on the latest index, paled in comparison to what was observed in the fourth quarter of 2016, when they surged 8 per cent compared to a year earlier.

That was the greatest yearly increase of any market at the time.

“Increased supply in the market in the year to Q1 2017 contributed to a slowdown in the growth rate of rents,” Khan explains.

In the second quarter of this year, Ontario announced it was expanding rent control to apply to all rental units in the province. Previously, only buildings constructed before 1991 had rent increases limited.

Khan says the policy measure might have an immediate impact on the market, but another factor will determine the longer-term effects.

“There may be a slowdown in the growth rate in the short run due to the new rental guidelines,” says Khan. “However, the long-run trend will very much depend on the level of new rental supply,” he adds.

While some say rent control will cause developers to steer clear of the rental segment as their profits are limited, Khan suggests otherwise.

“Average mainstream yield for apartments are still at an attractive level,” he notes, pegging it to be in the range of 5 per to 5.5 per cent.

“It is still attractive to continue to service an under-supplied segment of the market.”

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