Demand Trends for the Canadian Market:

Despite a slow start to the year, March demonstrated that demand can remain robust despite any conditions, as evidenced by a significant upswing in renter interest. In addition, there has been a continued increase in property availability throughout the country, marking the second consecutive month of growth in both property availability and demand. This growth has been strong enough to offset the previous month's decline, indicating that the industry is positioned for a promising leasing trajectory as we head into the warmer months of spring and summer.

Nationally demand scores are up +20% between February and March, with properties up +3.2%, and unique prospects up +24%. Taken altogether, this offers a promising outlook for the upcoming 2023 leasing season, characterized by a healthy and steady buildup leading to the peak demand activity.

Primary markets lead the pack with the highest monthly increase in prospects up +27% from February and suggesting that renters continue to be attracted to larger urban centres allowing them to show strong renter demand. Although flex-working remains a hot-button issue for many, many workplaces continue to move in the direction of in-person working which will continue to drive demand to major markets which offer the greatest employment potential to those looking to move.

This rebounding of demand was all but expected and follows typical annual trends with March representing the first in many months of rental demand growth leading up to the summer leasing season. The market is gradually becoming hotter and more competitive amongst renters as the population of prospects continues to outpace the available supply of purpose-built rentals.

Below we will identify notable changes in rental demand, highlight market-specific trends, and discuss what the coming months may look like for the rental demand in Canada.

Top 40 Canadian Cities in Demand

Notable Changes in Demand Over the Past Month

March represents the first month of returned growth post-seasonal decline, with strong leasing activity showing many renters leaving their current homes, or at the very least planning for an upcoming move. Once again we see a reshuffling of our top 10 markets and many Western Canadian communities rising to the top three spots in our demand rankings. Burnaby and Calgary were standout markets in March, the former gaining 5 positions in our demand rankings month-over-month, and the latter gaining 25 positions from this time last year; showing the strong growth in rental interest being experienced in Western Canada.

Month-Over-Month (M/M)

• Primary: Demand scores are up +24%
• Secondary: Demand scores are up +17.4%
• Tertiary: Demand scores are up +10.5%

Month-over-month (M/M) National demand scores are up by +20.1% in March 2023 compared with February 2023. Marking the first month of renewed renter interest we are likely to continue seeing positive demand growth leading up to the summer months.
 

Year-Over-Year (Y/Y)

• Primary: Demand scores are down -5.1%
• Secondary: Demand scores are down -35.8%
• Tertiary: Demand scores are down -42.3%

Year-over-year (Y/Y): National demand scores are down -18.4% in March 2023 compared with March 2022. Demand scores continue to trend downwards annually for the fifth month in a row. Primarily due to the strong growth trajectory experienced at the end of 2021 leading into the strong maintained leasing period throughout 2022. Demand scores don't paint the full picture however as unique prospects per property are up +6.7% year-over-year which puts properties in a much better position to attract quality tenants than last year. The greater imbalance between properties and available tenants looking for housing results in a greater share of leads per property. While overall market conditions have cooled, the lack of available supply has resulted in less competition amongst properties and more motivated prospects.

An Analysis of The Top 10 Canadian Markets:
 

Top 10 Canadian Cities in Demand Drill Down (M/M): March 2023 vs. February 2023

Key Trends for Top 10 Canadian Cities in Demand (M/M)

Typically the top 10 markets show a more exaggerated change relative to the broader country however, this month they show more subdued changes monthly. This is however not indicative of the overall performance of these markets as this lower relative growth is primarily due to Etobicoke, North York, and Brampton which either experienced a lower-than-expected monthly change, or a decline in overall demand scores, as was the case with Etobicoke. Overall demand scores are up +18% month-over-month, with unique prospects increasing by +19.5%, and properties up by +1.4%. Average rents have continued to slow but inch upwards with a month-over-month change of +0.8% showing that even following 3 months of general declines, the imbalance between supply and demand, especially in the most popular markets will continue to drive rents.

Part of this rent growth is likely attributed to a survivorship bias with more moderately priced units being leased first and leaving more premium units on market for longer.

Top 10 Canadian Cities Drill Down (Y/Y): March 2023 vs. March 2022

Key Trends for the Top 10 Canadian Cities in Demand (Y/Y)

Year-over-year the top 10 markets experienced a decline of -13.4% in demand scores. While demand scores are down, market fundamentals remain strong with average prospects per property up +13.3% year-over-year due to properties declining by approximately 2.7x the rate of prospects. With prospects down by -6.5%, and properties down by -17.5%. Property counts are likely to continue trending downwards on a year-over-year basis throughout the next 6 months until we reach an equilibrium between current vacancy rates and those represented by the data from the previous calendar year.

The composition of the top 10 markets is relatively heavily Ontario weighted representing 6 of the top 10, with the remaining markets coming from British Columbia (Surrey, and Burnaby), Alberta (Calgary), and Nova Scotia (Halifax).

An Analysis of Key Canadian Markets

To better segment our data and analyze what is happening within specific markets across Canada, we have broken down the rest of our data into 3 key market segments: 

• Primary (Populations Over 600K)
• Secondary (Populations Between 600-235K)
• Tertiary (Populations Between 235-100K)

Here we will gain a deeper perspective on demand across larger population centers and trends in various markets.
 

Primary Markets (Populations >600K)

Primary Market Drill Down (M/M): March 2023 vs. February 2023

Notable Changes in Primary Markets Over The Past Month
 

*Overall demand scores are up +24% month-over-month, unique prospects are up +26.6%, and properties are up +2.1%.
 

Primary markets showed the strongest growth in March with a substantial increase in the overall supply of available properties and an even more exaggerated shift in renter demand. While it provides relief to many properties which may have struggled to attract sufficient leads throughout the previous 4 months, it also means increased competition amongst renters for a shrinking relative market of available properties. The order of markets within our rankings experienced a minor reshuffling with some markets showing more muted growth ( Ottawa, North York, and Mississauga with an average +6.3% change in demand scores) as compared to +30% averaged amongst the remaining markets in our list.

Average rents continue to maintain a slow pace with a monthly change of +0.58% maintaining the rate of change of the previous 3 months. With some markets experiencing a minor dip in rent, and other showing slight growth the overall average is gradual if not moderate growth.

As indicated last month  Calgary continues to show strong maintained growth. Achieving the top spot within our primary market rankings, likely because of the strong appeal it offers to those looking for a more affordable cost of living, along with the amenities of a larger urban centre. Offering residents proximate access to employment and leisure, while also offering a slight discount on the cost of living continues to appeal to many renters looking for new rental housing. Calgary will continue to be an important market to watch for over the next year as Alberta continues to attract new residents thanks in part to the �Alberta is Calling” advertising campaign which aims to attract young professionals through the promise of affordable housing and the potential for future growth.
 

Primary Market Drill Down (Y/Y): March 2023 vs. March 2022

Notable Changes in Primary Market Demand Over The Past Year
 

*Year-over-year demand scores are down -5.1%, prospects are down -4.2%, and properties down -22.8%
 

For the second month in a row, we see a year-over-year decline in prospects which will likely continue to be more exaggerated with each passing month. Suggesting that in March 2023 we have long since passed peak renter demand and each following month will likely continue to show annual declines. March 2022 represented an already strong leasing market with constant growth over 3 months and barely slowing due to seasonality as more people wanted to move after the reopening of markets from covid restrictions.

This strong leasing activity persisted and resulted in this steep decline in available properties year over year. Although vacancy rates are at an all-time low, and renter counts are declining, primary markets remain in a better competitive position relative to early 2022 due to the higher relative number of available prospects per available property +24.1% year over year.

Unfortunately with a return to tighter market conditions, annual comparisons are becoming less valuable as communities return to an almost frozen state with limited availability, and a maintained albeit growing demand for rental apartments.

Secondary Markets (Populations ~600-235K)

Secondary Markets Drill Down (M/M): March 2023 vs. February 2023

Notable Changes in Secondary Market Demand Over The Past Month

*Secondary markets demand scores are up +13.6% month-over-month, unique prospects are up +13.6%, and property counts  are unchanged.

Secondary markets were the only market segment to show no change in property counts from the previous month. This resulted in demand metrics growing in line with the change in unique prospects +13.6%. While last month showed no growth in renter demand, properties increased at a higher rate than the broader country suggesting that there is a relatively limited supply of available units in most markets and that unless people begin to move once again we are unlikely to see any substantial shift in property availability.

Rent growth for secondary markets has also increased by +0.85% from February. The higher rent growth in secondary markets suggests that they have not hit a price ceiling and may continue to show stronger relative growth as demand rebounds.

Secondary Market Drill Down (Y/Y): March 2023 vs. March 2022

Notable Changes in Secondary Market Demand Over the Past Year

*Overall, year-over-year demand scores are down -35.8% year-over-year, with prospects down by -24.3%, and properties down by -9.8%.

As with all annual comparisons, they are disconnected from the current demands they do not provide sufficient explanation for long-term trends in demand as by this time in 2022 secondary markets had long since experienced peak demand and were in the process of stabilizing. Although primary markets began to take a growing share of the market, secondary markets maintained substantial interest with many renters due to their greater level of amenitization, and proximity to employment centres. In the subsequent year, many renters migrated to larger urban centres which resulted in a significant loss of unique prospects. 

Although a considerable number of renters have left secondary markets, they remain a serious contender for many renter households looking for access to major markets, while also reducing their cost of living.

Tertiary Markets (Populations ~235-100K)

Tertiary Markets Drill Down (M/M): March 2023 vs. February 2023

Notable Changes in Tertiary Market Demand Over The Past Month

*Demand scores in tertiary markets increased by +10.5% month-over-month, unique prospects increased by +22.7%, and available properties increased by +11.1%.

Tertiary markets experienced the greatest monthly shift in overall market conditions in March with an above-average increase in property availability, and strong growth in unique prospects. Although these communities have long fallen out of favour with the general public; most people have since returned to primary markets for their employment opportunities. And although they are not as popular as they were during the peak of the pandemic, they maintain strong market fundamentals with a substantial number of renters showing interest in these communities on an ongoing basis.

Tertiary markets will continue to attract a dedicated renter population ensuring that properties can attract high-quality renters and fill vacancies.

Tertiary Markets Drill Down (Y/Y): March 2023 vs. March 2022

Notable Changes in Tertiary Demand Over the Past Year

*Overall, year-over-year demand scores are down by -42.3%, unique prospects are down by -27.9%, and available properties are down by -4.6%.

Much of the interest in tertiary markets was gone before March 2022, leading to a year of continued decline in overall demand scores with each subsequent month experiencing a more pronounced decline in demand scores. 

Regardless of the general trajectory of tertiary markets, they maintain strong fundamentals and with the benefit of lower vacancy rates after 2 years of strong leasing activity can maintain limited availabilities. We will have to continue tracking these communities as they are the closest to potentially experiencing a pinch with properties growing faster than the broader country which creates a more favourable environment for renters.

Conclusion
 

In March, the rental market bounced back to its conventional trends and fully recovered from the losses in renter demand that were experienced in February. While the pace of this growth may have been unexpected, it was perfectly timed as the market typically experiences a strong surge in March following a seasonal decline from September to February. As we have returned to typical seasonality, we anticipate that this growth trajectory will continue through the upcoming months and into the peak summer leasing period.

Primary markets showed the strongest growth this month proving their continued dominance representing over 68% of total renters across Canada, and 71% of total properties. Large urban centres will continue to dominate Canada's rental landscape with a growing number of renters choosing to call them home.

Average rents for one-bedroom units are stable and continue to slowly trend upwards with a monthly change of +0.6% nationally. With tertiary market the pack at +1%, followed shortly after by secondary markets +0.85% month-over-month. Although many renters across Canada have voiced their frustrations with growing rents, this more subdued growth is not likely to offer much relief given that actual market rents continue to trend upwards. With no practical solution available rent relief is unlikely to come.

As March delivered the anticipated growth, we can expect the usual annual trends to persist in the coming months, as leasing activity gradually escalates leading up to the summer leasing season. In this regard, property owners and managers should take heed of this ongoing trend to ensure they are well-prepared for the upcoming peak leasing period. It is crucial to keep a watchful eye on lead sources and maximize outreach efforts to ensure that your property is front and center when renters start searching for new homes.

To maximize incoming leads and fill available vacancies, consider booking a strategy call with Rentsync to ensure your leasing and marketing initiatives are positioned correctly.