Canada’s rental market showed no sign of slowing leading into August. With rental demand growing and showing that even when vacancy rates are at an all-time low, the demand for more units is stronger than ever.
This last month would typically represent the peak in annual rental demand with both renters and property inquiries declining after July however with this year's more delayed onset of strong leasing activity we may have yet to see the true peak.
The supply of available units has become nearly completely disconnected from the demand posed by renters. Whereas supply was once at least partially dictated by turnover; the number of people leaving their existing apartments, turnover now seems to have less impact when determining renter demand with more and more people entering the market, as opposed to looking for their next rental. With more people entering the rental market demand will continue to tighten regardless of whether supply shrinks, remains the same, or even grows monthly. Unique prospects are up +11.6% month-over-month, while available properties are up 0.5%.
With fewer units re-entering the market during the peak of Canada’s leasing season, renters may struggle when it comes to finding their next home.
Secondary markets continue to show strong growth with an ever-growing number of renters choosing affordability over convenience of commute. Those cities which offer a lower cost of living while still being within easy reach of major employment centers show the greatest month-over-month gains in unique prospects. Tertiary markets come in at a close second showing that smaller communities with limited units hold strong staying power. With month-over-month demand scores up 25.3%, the highest in the country.
In the following sections, we 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.
Rental demand shows growth across the country however, the greatest gains were seen in secondary and tertiary markets which while equally as competitive if not more competitive to their primary market counterparts, offer a lower cost of living. The top 10 markets saw a reshuffle with Etobicoke and North York taking the top 2 spots thanks to a +28%, and +16% increase in unique prospects respectively. Smaller communities showed the greatest growth in demand scores with Sarnia +81%, and Sudbury +76% showing the greatest monthly growth.
Month-over-month (M/M) National demand scores are up +14.1% in July 2023 compared with June 2023. Maintaining the trajectory of growth we are now well within the peak of 2023’s summer leasing season.
The past year saw both strong declines in renter activity and a subsequent resurgence in renter demand. Comparing the current peak in renter activity to that of last year's peak shows that primary markets are the only segment to have experienced growth from last year's peak, while smaller markets have shown declines relative to last year. The demand rankings have similarly experienced a complete re-shuffling from last year with the top 10 markets showing the greatest change and effectively flipping their order. As a whole both unique prospects and available properties are down year over year.
Year-over-year (Y/Y): National demand scores are up +0.2% in July 2023 compared with July 2022.
In order to provide a more detailed analysis of the rental demand in specific markets across Canada, we have segmented our market data into 3 key market segments.
Examining these market segments individually offers a deeper understanding of demand patterns within larger population centers, and allows us to identify trends across markets.
*Overall demand scores are up +10.6% month-over-month, unique prospects are up +9.4%, and properties are up +1.6%.
Primary markets saw the most muted monthly change in overall renter demand in Canada. These markets account for 72.5% of total renters within our reviewed markets and have seen a monthly growth of unique prospects which is approximately half that experienced by smaller secondary and tertiary markets.
The previous quarter saw the supply of apartments and the demand for units in primary markets moving in opposite directions, creating ever tighter demand and leaving fewer options for those looking for a new home. Now that we are likely at the peak of expected annual demand; supply has shifted and begun to inch upwards offering some relief to those still in the market for a new home however, this relief may have been too late with many renters now redirecting their rental searches to secondary markets in search of more affordable housing.
*Year-over-year demand scores are up +9.9%, prospects are down -11.9%, and properties are down -17.3%
Continuing from June we see ongoing year-over-year growth in demand scores for primary markets. This is the result of prospect counts declining for the 6th month in a row, only to be outdone by the decline in available properties which has resulted in increased average prospects per property. This means that although there are fewer renters today, those renters are competing for a dwindling market of available properties.
Primary markets have long since stabilized and offer a view of ever tighter availability with low vacancy rates, and strong renter demand. Unfortunately, the tightened market conditions have the potential to reduce demand in the short term with renters either choosing to remain in place or move to markets with greater supply. Regardless, the draw of strong amenitization and proximate employment continues to attract residents to primary markets ensuring continued demand and long-term viability for large urban centers.
*Secondary markets demand scores are up +20.6% month-over-month, unique prospects are up +18.3%, and property counts are up +0.8%.
Secondary markets have shown explosive growth in rental demand this month coming in a close second to tertiary markets. While these markets may not have achieved the highest monthly increase in overall demand scores, they currently achieve the highest relative demand with an average of 33 prospects per property. And with only 12% of total available properties located in secondary markets, maintaining an average prospects per property count that is 30% and 70% higher than primary and tertiary markets respectively indicates just how much rental demand exists within these communities.
Average rents have for the most part remained unchanged in secondary markets with a monthly decline of -0.2% relative to a broader 1% increase in rents seen across the broader country.
Strong ongoing demand in secondary markets is a good indicator for property owners and managers that these communities, while may have come out of the spotlight, maintain strong interest by renters, and will likely continue growing as more renters see them as a viable option for their next home.
*Overall, year-over-year demand scores are down -27.8% year-over-year, with prospects down by -29.1%, and properties up +1.3%.
For the first time, we see an increase in the year-over-year supply of available properties in secondary markets. This is unlikely to be related to slowing demand, as property counts in secondary markets have for the most part remained relatively stable throughout the past year while vacancy rates have similarly maintained record lows. This minor uptick is likely related to the introduction of new properties to secondary markets whether they be new multifamily properties beginning lease-up, or single-family homes being put up for rent whether wholly or sublet.
Even though secondary markets maintain the highest average prospects per property count in the country, it remains down -30% year over year suggesting that while there remains strong interest in these communities; these markets as a whole are more approachable for prospective renters with fewer people competing for the same shrinking supply of available properties.
*Demand scores in tertiary markets increased by +25.3% month-over-month, unique prospects are up +18.7%, and available properties are down -2.7%.
Tertiary markets have outpaced the rest of the country with a higher-than-average increase in demand scores thanks primarily to strong growth in renter counts, alongside a decline in available properties.
Tertiary markets have seen strong growth alongside secondary markets and will continue to appeal to more price-conscious renters so long as market rents in primary markets continue to grow. With the only solution to this being the introduction of new rental product; we see no immediate end in sight for the ongoing trends experienced by these communities.
*Overall, year-over-year demand scores are down by -17.8%, unique prospects are down by -19.2%, and available properties are up +1.4%.
For the second month in a row, annual comparisons show signs of recovery, with tertiary markets displaying a loosening of demand with average prospects per property down -20.3% year-over-year, and property counts beginning to inch upwards once more.
Rental demand in tertiary markets is unlikely to return to pandemic highs however the overall declines in prospect counts should not be seen as a negative indicator of the long-term success of these markets. Instead dropping prospect counts are indicative of these markets returning to more conventional leasing trends. Additionally, with the ongoing supply issue being experienced across the country these markets are unlikely to see serious challenges in leasing available units. These communities remain appealing options for those still able to work remotely, or simply those looking for a smaller community to call home.
Alongside the peak in the 2023 summer leasing season, we also saw the more exaggerated expression of renters in search of affordability; a trend experienced throughout the year and dictating amongst many others, what markets prospective renters are interested in. Demand has continued to trend upward across the country and although varying from market to market, on average the population of prospective renters has increased by +11.6% month-over-month which is the highest single-month increase seen this summer.
The competition for available rentals has continued to tighten with average prospects per property up 11% month-over-month meaning that the demand for available units has only further accelerated from the supply of units entering the market.
Secondary and tertiary markets saw the greatest gains this month due primarily to a surge in prospective renter counts. Conversely, primary markets saw a below-average increase in prospect counts suggesting that more people continue to turn to smaller markets for their housing search. Although looking for housing in secondary markets may not be any less competitive than larger urban markets, these smaller markets offer a lower cost of living, alongside more affordable rents. As such we expect these communities to continue putting pressure on urban markets and drawing away those renters who are willing to trade off convenience for more money in their pockets.
This surge in rental demand may represent the final push before the eventual Fall seasonal decline. Meaning that the following months will begin to show more muted changes before an eventual decline in prospective renters with more and more simply choosing to remain in place as the weather cools and the seasons begin to change.
Property owners and managers should take special care to ensure that their properties are well-positioned in preparation for the changing seasons. As leasing activity slows down so too will the quality of incoming leads. We encourage all property owners to take proactive steps toward filling vacancies and building a high-quality online presence to ensure their properties' visibility and rank.
To present this data, Rentsync has determined three key calculations for each area of the report, they are as follows:
Demand Score: Our demand score is rated out of 10 (with 10 being the highest score a city can receive), and is calculated based on unique leads per property, per city, and compared against benchmark data.
For Example Etobicoke, ON received a demand score of 7.1 this month, versus 5.4 last month. Etobicoke experienced a 1.7-point increase in its demand score.
Demand Percentage (% +/-): This is determined according to the year-over-year (YOY) or month-over-month (MOM) increase or decrease in unique leads per property.
For Example The month-over-month demand scores in Etobicoke, ON went up +32% in July 2023 versus June 2023, while gaining 4 positions within our rankings as the highest-achieving market in July. The year-over-year demand score in Etobicoke decreased by -1.1 points representing a -13% decrease from July 2022.
Position: The position is determined by unique leads per property
For Example This month, Etobicoke, ON achieved the top spot on our Top 40 Canadian Cities in Demand rankings and is up 3 positions from last year.
*This report provides month-over-month rental listing data for July 2023 versus June 2023, as well as a year-over-year comparison from July 2023 versus July 2022. It also outlines the month-over-month and year-over-year trends in primary, secondary, and tertiary markets.