Toronto's condo rental market is beginning to mimic its ultra tight resale housing market, with soaring demand, lack of supply and costs rising to record levels.

Real estate consulting firm Urbanation says the number of condo apartments rented through the Multiple Listing Service (MLS) system in the third quarter of 2016 dropped nine per cent from last year to a total of 7,651 units. Urbanation says the drop can be at least partly attributed to a 30 per cent year-over-year decline in the number of new projects.

This lack of availability, Urbanation says, is sending condo rents skyward, with the number of units renting for above asking price, more than doubling from a year ago.

Overall, condo rents rose nine per cent in the third quarter compared to the same period last year, with the average condo now renting for $29.14 per square metre ($2.71 per square foot), or $1,986 per month.

"The rental market has become severely undersupplied, which is likely to worsen following the latest round of mortgage insurance rule changes," said Shaun Hildebrand, Urbanation's senior vice-president, in a widely disseminated news release.

"Notably higher qualification standards for first-time buyers and reduced credit availability for investors should put even more pressure on the market, even as more rental units are being built," says Hildebrand.

Ottawa's new tighter mortgage rules go into effect on Monday.

In addition to cracking down on tax leakage by foreign money, another change is that after the new rules come into effect, all insured mortgages must undergo a "stress test" that ensures a borrower's ability to make their mortgage payments at a higher interest rate.

Effectively, that means borrowers will be tested against their ability to pay their mortgage if actual rates were as high as the big bank's five-year posted mortgage rates, which the Bank of Canada says currently average 4.64 per cent.

The tougher stress test is expected to affect first-time buyers the most, which could put even more demand on the already stretched condo rental market.

Condo rents in the old city of Toronto (not including the inner suburbs), which includes many of the highrises downtown, are even higher than those in the broader GTA. In Toronto proper, the average rent rose 10 per cent from last year to $2,145 per month.

At the same time, Urbanation's survey of newer, purpose-built rental apartments (completed since 2005) found a vacancy rate of just 0.6 per cent.