Marketing Managers
Demand Trends for the Canadian Market:
Canadian renters simply aren't returning to the rental market like they used to.
In May we saw that active prospects were relatively flat at -0.5% month over month across the country, Compared to last year which saw 4% month-over-month growth in May. Leading into the busier summer months; this year may very well have the slowest leasing activity in recent memory.
This demand will likely remain greater than what was experienced during peak COVID, but it nonetheless indicates a serious departure from the long-standing trends seen in annual rental demand throughout the past 20 years. The typical seasonality of rental demand would see active prospect counts begin to increase in April through May of each year. This demand would continue to grow with each passing month until July/ August which would represent the peak of that year's leasing demand, followed by a decline into the fall and subsequently the winter months. It remains early enough that we may still see a rebounding of rental demand during the actual summer months, the general trend of declining prospect counts is concerning and is consistent with broader market shifts.
Several factors have contributed to this trend, including the rising cost of rent, the growing cost of living, and subsequently economic uncertainty and feelings of instability by many Canadians. Renters have become increasingly more cautious and selective when making housing decisions. Many who choose to move are opting for more affordable options, while many more are opting to stay put to avoid facing higher rents and moving expenses.
We’re seeing the outcomes from a lack of affordable housing play out in real-time, with depressed leasing activity, and changing dynamics. With fewer active renters, the long-term implications suggest a potential for further tightening of rental demand unless the concerns posed by renters are addressed.
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.
Top Canadian Cities in Demand
Notable Changes in Demand Over the Past Month
Demand scores are down month-over-month across the country -2%, with prospects down only 0.5%, while properties are beginning to rebound up 1.5% from April. The top 10 markets by demand scores show a more exaggerated decline of -3%, with prospects down a more dramatic -5.6%, and properties down 2.6% month-over-month. This decline is a continuation from the previous month which reflected conventional trends however, as of May this decline is considered unseasonal. Typical seasonality would see this trend rebound however Canadian markets remain down.
Month-Over-Month (M/M)
- Primary: Demand scores are down -1.2%
- Secondary: Demand scores are up -9.0%
- Tertiary: Demand scores are down +0.8%
Month-over-month (M/M) National demand scores were down -2.0% in May 2024 compared with April 2024. While May saw total prospect counts decline, the overall number of leads submitted increased by 1.5% month-over-month.
Notable Changes in Demand Over the Past Year
Annual demand score comparisons show an incorrect view with year-over-year demand scores up +9.7%, while actual prospect counts are down -28% nationally, and total leads are down 22%. The annual growth of demand scores is not directly reflective of real-world conditions and instead due to the long-term shifts in average prospect counts which are used to normalize demand scores and due to their long-term trend of decline show less moderation than the actual values which go into the demand score calculation.
Year-Over-Year (Y/Y)
- Primary: Demand scores are up +11.3%
- Secondary: Demand scores are down +8.1%
- Tertiary: Demand scores are up +16.2%
Year-over-year (Y/Y): Within our top 40 markets demand scores are up +9.7% in May 2024 compared with May 2023. Real demand by renters has declined year over year with total leads down -22%. However, the renters who remain active in the market are submitting more leads with the average number of leads submitted up +9.4% year-over-year.
An Analysis of Key Canadian Markets
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.
- Primary (Populations Over 600K)
- Secondary (Populations Between 235-600K)
- Tertiary (Populations Between 100-235)
Examining these market segments individually offers a deeper understanding of demand patterns within larger population centers, and allows us to identify trends across markets.
Primary Markets (Populations >600K)
Primary Market Drill Down (M/M): May 2024 vs. April 2024
Notable Changes in Primary Markets Over The Past Month
*Overall demand scores are down -1.2% month-over-month, unique prospects are down -1.8%, and properties are down -0.6%.
Primary markets saw limited movement in April with only 2 markets gaining positions in our rankings. That being Vancouver which took the top spot, and Edmonton which took the 7th spot from Mississauga. Although the top 10 average shows declining prospect counts; the bottom 4 markets showed positive growth in April including Edmonton, Mississauga, Scarborough, and Toronto which saw prospect counts increase by an average of +4.9%.
Primary Market Drill Down (Y/Y): May 2024 vs. May 2023
Notable Changes in Primary Market Demand Over The Past Year
*Year-over-year demand scores are up +11.3%, prospects are down -31.5%, and properties are down -11.2%.
Annual market comparisons continue to show more aggressively declining prospect counts. The order of our top 10 primary markets saw a reshuffling most notably with Montreal #3 and Winnipeg #5 each gaining 4 positions annually. With so many renters concerned about the high cost of living, and growing rents across the country, we see that those markets which remain more affordable can maintain stronger fundamentals. Winnipeg and Edmonton are the only 2 markets within our top 10 with more favourable year-over-year comparisons of prospect counts.
Secondary Markets (Populations ~235-600K)
Secondary Markets Drill Down (M/M): May 2024 vs. April 2024
Notable Changes in Secondary Market Demand Over The Past Month
*Overall, year-over-year demand scores are down -8.1% year-over-year, with prospects down by -36.6%, and properties down by -0.5%.
Secondary markets saw the largest annual decline in prospect counts relative to primary and tertiary markets. This also resulted in a substantial drop in average prospects per property of -36.3% annually. No markets were immune to the decline in prospects ranging from -15% in Hamilton, to -54% in Etobicoke. Once again the markets that represent the highest rents in a region often show the greatest relative decline of active prospects. With financial security on the mind of many renters, decisions around housing especially in more affluent areas are tougher to make, with many simply choosing to remain in place and as a result active prospect counts decline.
Secondary Market Drill Down (Y/Y): May 2024 vs. May 2023
Notable Changes in Secondary Market Demand Over the Past Year
*Demand scores in tertiary markets increased by +0.8% month-over-month, unique prospects are up +6.5%, and available properties are up +5.7%.
Tertiary markets were the only segment to show positive growth in May. Not all markets benefited from increased prospect counts with Burnaby, and Burlington showing minor declines, along with East York, St. Catharines, and Cambridge which showed an average decline of approximately -10%. The remaining markets including Abbotsford, Saskatoon, Sudbury, Guelph, Regina, and Kingston showed an average increase of +14.6%.
Tertiary Markets (Populations ~100-235K)
Tertiary Markets Drill Down (M/M): May 2024 vs. April 2024
Notable Changes in Tertiary Market Demand Over The Past Month
*Demand scores in tertiary markets increased by +0.8% month-over-month, unique prospects are up +6.5%, and available properties are up +5.7%.
Tertiary markets were the only segment to show positive growth in May. Not all markets benefited from increased prospect counts with Burnaby, and Burlington showing minor declines, along with East York, St. Catharines, and Cambridge which showed an average decline of approximately -10%. The remaining markets including Abbotsford, Saskatoon, Sudbury, Guelph, Regina, and Kingston showed an average increase of +14.6%.
Tertiary Markets Drill Down (Y/Y): May 2024 vs. May 2023
Notable Changes in Tertiary Demand Over the Past Year
*Overall, year-over-year demand scores are up by +16.2%, unique prospects are down by -21.2%, and available properties are down -2.2%.
Tertiary markets show the lowest relative annual decline in prospect counts relative to larger market segments and the broader country. While the annual figure has increased with each passing month, May marks the first month where the year-over-year prospect decline shrunk from -24.1% in April to -21.2% in May. The decline of prospect counts in larger markets is likely to continue into the foreseeable future. While smaller more affordable communities are likely to trend down while remaining below the national average.
Conclusion
Renters continue showing hesitancy in returning to rental markets. Active prospects remained relatively flat month-over-month down only -0.5%. A potential sign of concern as we lead into what is typically the busiest period of annual leasing activity; and a large number of renters choose to remain in place. This summer may see the slowest leasing activity in recent memory.
Rental demand will likely remain above what was experienced during the height of the pandemic however, the unseasonably low growth in rental demand indicates a departure from the long-standing trends of annual rental demand. Typically rental demand would see active prospect counts begin trending upwards in April/ May, peaking in July/ August before declining into the fall and winter months, and entering into the following year where the cycle is repeated. It remains relatively early in the season suggesting that we may still see a rebounding of rental demand during the summer months however, the general trend of declining prospect counts is concerning and reflects a broader shift by many renters.
This trend of declining interest amongst renters didn't happen in a vacuum, nor did it happen without warning. The contributing factors included decreased affordability, and the growing cost of living and as a response renters became increasingly focused on securing affordable housing. Some did so by migrating to areas which offered better affordability, while many more chose to stay in place thus reducing the turnover rate and further depressing rental demand. This reduced turnover has the potential to accelerate rent growth as renters compete for a dwindling supply of available units.
The dynamics of this year's summer leasing season continue to evolve and monitoring these trends will be crucial. The potential influx of new rental units could provide some relief, but whether this will be enough to reverse the current trend remains to be seen. For now, the Canadian rental market faces a period of uncertainty, requiring careful attention and strategic adjustments to navigate the evolving landscape effectively.
Methodology
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 Burnaby, BC received a demand score of 5.6 this month, versus 6.5 last month. Burnaby experienced a 0.9-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 Burnaby, BC decreased -14% in May 2024 versus April 2024. The year-over-year demand score in Burnaby increased by 0.5 points representing a 10% increase from May 2023.
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, Burnaby, BC achieved the top spot on our Top Canadian Cities in Demand rankings while it was not included in last year's rankings due to not reaching the required minimum property count.
*This report provides month-over-month rental listing data for May 2024 versus April 2024 and a year-over-year comparison from May 2024 versus May 2023. It also outlines the month-over-month and year-over-year trends in primary, secondary, and tertiary markets.
