Rising prices for condominiums in the Greater Toronto Area are pushing rents higher and spurring development, a real estate consulting firm said Thursday.

Toronto-based Urbanation said the average rental price for a condo in the first three months of 2016 in the Greater Toronto Area was up almost seven per cent when compared to the same time frame last year.

The average rental rose to $2.53 per square foot, or $1,891 monthly.

"The rental market is benefitting from strengthening fundamentals such as employment and population growth, but also quickly eroding affordability and intense competition in the ownership market," said Shaun Hildebrand, senior vice president at Urbanation.

"Even with record numbers of condos coming up for rent by investors, conditions have tightened, supporting increased rental development," Hildebrand said.

After purpose-built construction starts increased to a 25-year high of 3,476 units in 2015, applications for new rental developments surged by 40 per cent between the start of January and the end of March, Urbanation said.

Fewer condos available too

Meanwhile, the vacancy rate within the 7,309 purpose-built units completed since 2005 averaged 0.5 per cent.

Illustrating the tight market conditions, condo lease transactions grew faster than total listings for a fourth consecutive quarter.

Additionally, the average time a rental condo was on the market fell from 27 to 23 days, and the number of rentals that leased for higher than asking rents shot up by 59 per cent, Urbanation said.