Marketing Managers
Canadian Rental Market Year in Review: 2024
Canada's rental market encountered significant challenges throughout 2024, following a period of rapid rent growth that gave way to a notable slowdown characterized by stagnating rents and declining demand. Asking rents reached a 15-month low as renters increasingly resisted premium pricing, particularly in many high-cost markets. Although seasonal demand showed some recovery during the first half of the year, overall activity remained considerably lower compared to the previous year.
Economic factors such as the rising cost of living and broader financial uncertainty contributed to a dramatic 29% reduction in the number of active renters. Simultaneously, the addition of newly completed rental units heightened competition, compelling property owners to prioritize tenant retention strategies and reprice their units to attract a limited renter pool. While primary markets experienced significant difficulties, secondary and tertiary markets began to show early signs of recovery, fueled by renters seeking more affordable housing options and better value for their money.
These developments underscore the evolving complexities of Canada’s rental market as it works to rebalance in response to shifting renter preferences and challenging economic realities.
Historical Context: Long-Term Supply and Demand Trends
The current state of Canada’s rental market results from the long-term trends revolving around supply and demand. Six years ago, rental markets were heating up across the country for the first time in 40+ years. Canada experienced a growing interest in new rental construction, due in part to worsening affordability and increasing asking rents. Exiting 2019, rental markets would have been considered a ‘seller's market’ with increasing demand and a strong outlook.
Unfortunately, 2020 saw a pause in this momentum, with the COVID lockdowns all but freezing Canadian rental activity. As rental demand experienced a dramatic decline, so did turnover, which dried up new leases that resulted in market rents nosediving. Afterwards, from 2021 through 2023, Canada saw a resurgence of rental demand and a corresponding increase in asking rents. This included much of the unmet demand which had been suppressed in 2020, and as a result, rents grew at an accelerated rate.
2024: A Market Slowdown
Decline in Rental Demand
By 2024, the rapid increase in rents proved to be unsustainable, with the market slowing to a crawl. Renters experienced rent exhaustion, with many showing an unwillingness to pay premium asking rents in their markets. While seasonal rental demand did rebound in the first half of the year, it nonetheless remained significantly down year-over-year. With additional factors such as the rising cost of living and uncertainty in the broader economy, the rental market saw a 29% decline in the number of active renters compared to the previous year.
Imbalance of Supply and Demand
The relative decline in rental demand, in combination with strong completions in the first half of the year, created an imbalance with a growing supply of new units competing for a declining population of active renters. This resulted in relative declines in asking rents across many major markets, with secondary market units, in particular, experiencing more aggressive re-pricing in a bid to attract prospective renters and reduce vacancies. This moved Canada into a ‘renters market’ with competition between properties for the limited population of active renters. In Ontario, this has resulted in some property owners of non-rent-controlled buildings focusing more effort on retaining existing tenants in a more competitive market.
Signs of Recovery
Secondary and Tertiary Markets Lead the Way
While 2024 as a whole has been marked by declining rental demand, there is light at the end of the tunnel for property owners. In the final months of the year, select markets showed signs of rebounding rental demand. While the least affordable primary markets continued to show declining rental demand, a growing number of secondary and tertiary markets marked signs of improvement. The communities that have signs of growth include those surrounding larger primary markets, along with several standalone markets offering direct highway access and strong regional connectivity. These markets have shown unseasonable growth during the colder winter months, which are traditionally the slowest leasing months of the year and see declining rental demand leading into the Spring.
Migration Patterns
The rebounding of rental demand in secondary markets, combined with continued declines in primary market demand, suggests that a greater number of active renters are opting to leave larger, less affordable communities, in search of greater affordability. While this demand represents a large cross-section of various renter profiles; a large number of movers were families and young couples looking to take the next step in their lives. With affordability concerns weighing heavily on household budgets, especially those looking to increase the size of their homes, moving to a different market is growing in popularity.
Looking Ahead: 2025 Forecast
There are many factors at play determining the trajectory of rental demand across the country; the new year is likely to bring with it a new set of trends, a continuation of existing trends, and a normalization of demand to some extent.
Key Predictions
- Primary Markets: These will likely continue to experience dressed rental demand through the first quarter of the year but are expected to see renewed rent growth during the summer leasing season, driven by structural undersupply.
- Secondary and Tertiary Markets: Stronger demand is anticipated, particularly in communities offering affordability, regional connectivity, and family-friendly housing options.
- Housing Supply: The continued focus on housing policy and supply will gradually start to see results with a rise in development applications and plan submissions.
Opportunities for Growth
The year ahead presents both challenges and opportunities for Canada’s rental market. While some markets are positioned to grow, others will struggle and underscore the pressing needs around supply, and affordability. Addressing the limited supply of new units and bringing more units to market offers more choices, greater variety, and ultimately allows for a continuum of housing options - enabling households of all types the benefit of finding a home that fits their needs and circumstances. A coordinated effort from developers, policymakers, and local stakeholders will be essential to meet the evolving needs of renters across the country in addressing the challenges we face.
The trajectory of Canada’s rental market in 2025 will depend on its ability to adapt to evolving trends, shifting renter preferences, and economic pressures. The year ahead promises both challenges and opportunities for industry stakeholders to shape the future of rental housing in Canada.
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