Entering the new year, Canada's rental market saw seasonal slowing further across the country. This continued decline shows expected seasonality with more and more renters choosing to forgo a rental search during the holiday season.
This decline is felt most prominently in secondary markets, which saw a relative stabilization of market conditions as supply rebounded from the decline in renter demand and property availability increased temporarily. On the national level however, we saw the continued contraction of available properties and unique prospects both monthly and relative to last year with overall prospect counts down -25% year over year, suggesting that we are well past peak leasing not only in cycle but by year.
Typically, unseasonably warm weather would see rental demand strengthen and grow relative to what would otherwise be expected mid-winter. However, this year we see no such resurgence with more and more households exiting the market. Whether due to price exhaustion or any variety of factors, renter demand continues to trend downwards and will likely remain depressed until the weather improves next quarter. This will be especially prevalent in the most popular and competitive rental markets which saw strong annual rent growth throughout 2023 and are now seeing some of the greatest monthly declines in monthly unique prospects.
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.
Demand scores trended down with some regions showing an accelerated decline. Across our top 40 markets; prospects declined by -15.7%, and active properties dropped by -2.8%. The top 10 markets fared worse with prospects declining by -18.9%, and properties by -4.5%. These declines are significantly larger than what was experienced last year, wherein unmet renter demand throughout the pandemic resulted in above-average leasing activity throughout the winter months. Although we are not likely to see more exaggerated declines throughout the remainder of this winter, we have yet to see the bottom of this demand curve; with lower renter demand still to come
Month-over-month (M/M) National demand scores are down -15.7% in December 2023 compared with November 2023. December saw an accelerated decline in rental demand across the country.
We saw a more dramatic decline in rental demand in the final month of the year relative to last year. Secondary markets saw the greatest relative decline in prospects along with a drop in overall demand scores.
Year-over-year (Y/Y): National demand scores are up +21.3% in December 2023 compared with December 2022. Annual demand score comparisons are not directly correlated as the divisor has changed. This resulted in higher demand scores for 2023 while actual demand score indicators such as unique prospects -23%, and properties -8.4% are both down year over year.
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.
Typically when we see both prospects and properties fall within a single month we attribute it to renters closing on properties and both being removed from market. This however was unlikely to be what happened in December with the decline in properties likely related to a reduction in turnover, combined with many within the rental industry taking time off and the result being reduced listing activity. The overall reduction in prospects this month -15.1% is in line with the broader national average of -15.7%. The overall ranking of primary markets remains relatively unchanged except for Calgary and Winnipeg both of which saw rank gains in December. Rents have effectively frozen with half of markets showing minor monthly growth, while the other half showed declining rents for one-bedroom units. Average market rents are unlikely to show growth for the foreseeable future until temperatures rise and the next phase in the annual leasing cycle takes place.
Annual market comparisons show a significant decline in the number of active prospective renters on market. This does not suggest that this year's rental interest has completely stagnated, instead it is likely due to the unseasonably high demand felt this time last year while December 2023 has shown more conventional demand trends with rental interest in primary markets declining significantly during the holiday season. The ranking of markets saw limited change with Mississauga and Winnipeg as the only markets which saw growth in their position within our demand score rankings.
Secondary markets were the only segment which saw property counts increase in December. This was not evenly distributed across the available markets, with Etobicoke, Halifax, and Hamilton either declining or remaining flat month-over-month. In contrast, the remaining markets saw varied levels of growth in available properties. Secondary markets saw the largest monthly decline in average prospects per property of all market segments at -19.2% due primarily to the increase in available properties, alongside the continued and accelerated decline in unique prospects. Actual prospect counts align with the broader national average however suggesting that actual renter demand has remained relatively in line with broader trends.
*Demand scores in tertiary markets declined by -17.5% month-over-month, unique prospects are down -20.4%, and available properties are down -3.5%.
Tertiary markets were plunged deeper into a seasonal decline as active prospects dried up during the holiday season. Property availability in December varied greatly by market with some displaying marginal growth in active properties, while others either stabilized month-over-month or declined. Regardless of the trajectory of active properties, seasonal demand is down, resulting in fewer units turning over, fewer leases signed, and fewer listings being enabled or disabled. This month saw an upset in the rankings with each market moving positions due to Burnaby not reaching the minimum property count to maintain its presence in our rankings.
As we step into the new year, Canada's rental market unfolds with a seasonal slowing spanning the nation. With more renters choosing to end or defer their search for a new rental home. Nationally, we see a monthly decrease in active prospects, alongside a decline in available properties. Compared to last year we see a -23% decrease in active prospects and only an -8.4% decrease in available properties. Long gone are the effects of pandemic-era demand with market conditions having since stabilized and entered into a new period of tightening conditions and limited availability.
Even with the unseasonably warm weather much of Canada saw at the tail end of 2023, demand continued to trend downwards. Potentially influenced by factors such as price exhaustion, limited supply, or any other slew of factors, renter demand continued to trend down. This trend has been most evident in more expensive markets which saw strong rent growth throughout the year and are now grappling with some of the most significant monthly declines in unique prospects in the country. These trends will likely remain the norm until the weather improves in the next quarter, ushering in the start of the 2024 leasing season.
Despite the trend of declining rental demand in December, there are several positives to consider. This year saw strong renter demand, rent growth, and big swings in rental activity. The first half of the year saw strong absorption with new construction properties experiencing strong initial leasing. Unfortunately, strong maintained rent growth resulted in price exhaustion amongst many renters which impacted communities under lease-up in the latter half of the year. Long-term renters moved less frequently with many instead choosing to remain in place as opposed to paying market rents, and turnover of occupied units decreased in many markets. Despite this, many continued to remain on market whether by need or circumstance. Units continued to be leased and overall market conditions continued to get tighter.
2024 offers new hope for the Canadian rental industry, with more policy, more funding, and more attention than ever before, the industry as a whole can take greater strides towards a better future with more apartments, greater affordability, and a healthier outlook. In the tightened market we see, the emphasis on securing qualified leads and high-quality tenants is more important than ever before.
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 North York, ON received a demand score of 6.9 this month, versus 7.6 last month. North York experienced a -0.7 point decrease 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 North York, ON went down -10% in November 2023 versus October 2023, while maintaining its position within our rankings as the highest-achieving market since October. The year-over-year demand score in North York increased by 2.2 points representing a 47% increase from November 2022.
Position: The position is determined by unique leads per property, with cities that have at least *20 properties or more. The position will vary depending on demand.
For Example This month, North York, ON achieved the top spot on our Top Canadian Cities in Demand rankings and is up 3 position from last year.
*This report provides month-over-month rental listing data for November 2023 versus October 2023 and a year-over-year comparison from November 2023 versus November 2022. It also outlines the month-over-month and year-over-year trends in primary, secondary, and tertiary markets.