Marketing Managers
Executive Summary
In this comprehensive national rental demand report, we outline significant changes in unique leads per property across Canada. The data presented here is the largest data-backed analysis of rental market demand in Canada using aggregate ILS data (over 20 rental listing sites).
The data included in the Rentsync National Rental Demand Report can be used to compare and contrast demand and lead volume for the properties you manage within a given city and will allow you to make more sound decisions on marketing and advertising.
As you observe demand and unique lead volume percentage, it's possible to measure this against your own metrics, and see whether you are in line with current industry trends, and if not, how to pivot your strategies as a result.
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: Halifax, NS received a demand score of 9.1 this month, versus 8.9 last month. Meaning Halifax experienced a 0.2 point shift 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 Halifax, NS went up 2% in August versus July 2022 making it the highest achieving market in August. In August 2022, the year-over-year Demand Score in Halifax went up 3.2 points representing an increase of 55% from August of 2021.
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, Halifax, NS moved up to achieve the top spot on our Top 35 Canadian cities in Demand rankings, up 10 spots from last year.
*The following report provides month-over-month rental listing data for August 2022 versus July 2022, as well as a year-over-year comparison from August 2022 versus August 2021. It also outlines the month-over-month and year-over-year trends in primary, secondary, and tertiary markets.
Key Takeaways:
Month-over-month (M/M): August may very well mark the end of the 2022 summer leasing season, with a slowdown in the recent trends of growth in prospects, and declining property availability; instead August saw declines across both metrics. Unique leads per property declined by -2.4%, and available properties declined by -3.7%. These figures continue to decline at a disproportionate rate resulting in unique leads per property increasing by a marginal +1.3%. Demand continues trending upwards the upward movement of rents has slowed significantly month-over-month with 1-bedroom rents increasing by +1% across the top 35 markets down from +2% month-over-month growth in July 2022. The increase in demand may be partly due to the more limited sample size with many markets gradually dropping off from our list of markets due to a lack of availability. Renters are however not oblivious to the tightening of market conditions and continue expanding their search criteria with average leads per prospect growing by an additional 3.9% monthly.
Month-Over-Month (M/M)
- Primary: Demand scores are up +2%
- Secondary: Demand scores are up +5%
- Tertiary: Demand scores are down -8%
*Demand scores have slowed across much of the country except for tertiary markets which saw a substantial decrease in prospective renters. Although partly due to seasonality, this can also be attributed to waning demand with many markets approaching saturation and low availability. The top spot changed once again, with Halifax taking the number one spot from East York which dropped 5 spots from the previous month.
Property availability and the number of prospective renters both declined across the country. Tertiary markets were hardest hit and were the only communities to see a decline in the average prospect per property of -7.7% month-over-month.
Year-over-year (Y/Y): Nationally demand scores are up +6.8% in August 2022 compared with August 2021 however, this growth is in gradual monthly decline. Unique prospects are down -35.4%, while properties are down -31.1% year-over-year resulting in average prospects per property declining by -6.2%. Down from the explosive growth in rental demand experienced during the second half of the summer of 2021, August 2022 sees the decline of a strong summer leasing trajectory, and more long-term cooling of rental demand felt post-pandemic.
Year-Over-Year (Y/Y)
- Primary: Demand scores are up +19%
- Secondary: Demand scores are up +10%
- Tertiary: Demand scores are down -27%
*The year-over-year analysis indicates that while rental demand has maintained a generally upward trajectory it masks the underlying cooling being experienced by the market with each subsequent month's year-over-year growth figures gradually decreasing. Tertiary markets are once again the outlier experiencing a decline in demand scores due primarily to the substantially greater decline in demand than property availability. This imbalance left average prospects per property down -36% and caused overall demand scores to decline.
August 2021 saw explosive growth with the re-opening of markets and reemergence of many to the rental market. With over a year of strong leasing activity markets may have finally begun to feel the brunt of stabilization with many interested in renting having already done so. When combined with the anxiety felt on the outlook of the broader economy we see a cooling of the market likely regardless of forecasted growth in demand.
Top 35 Canadian Cities in Demand
*Demand is determined by calculating unique lead volume per property by market. Due to a decrease in available properties in the rental housing market, this report will only highlight the top 35 cities in Canada based on our threshold that requires at least 20 properties to be included in our data sample.
Notable Changes in Demand Over the Past Month
Canadian cities experienced varying levels of growth month-over-month. Secondary markets saw the highest growth month-over-month, followed by primary markets, and lastly tertiary markets which saw a decline in demand scores. This month also saw the removal of 5 additional markets from our list with only 35 markets reaching the minimum requirements of 20 properties available. The decrease in available markets is attributed mostly to smaller mid-western tertiary markets with larger primary and secondary markets experiencing limited movement month-over-month.
Top 10 Canadian Cities in Demand Drill Down (M/M): August 2022 vs. July 2022
Key Trends for Top 10 Canadian Cities in Demand (M/M)
The top 10 markets are not immune from broader trends with both prospects and properties declining at -5%, and -7% month-over-month respectively.
August saw the top ten list dominated by a mix of secondary and primary markets with Halifax taking the number one spot. Ontario seems to have dominated the top 10 list of markets this month representing 6 of the top 10 spots and showing the greatest overall growth in rental rates with an average increase of +2% monthly for one-bedroom units, compared to a decline of -0.2% across the remaining markets. Regardless of location however demand scores have varied greatly with an average increase of 6% month-over-month and a range of scores from -29% to +32% each market is currently experiencing unique market conditions which make aggregated market conditions less accurate when grouping communities of various sizes across multiple geographies.
Top 10 Canadian Cities Drill Down (Y/Y): August 2022 vs. August 2021
Key Trends for the Top 10 Canadian Cities in Demand (Y/Y)
*Year over year we saw a decline in renter traffic, with unique prospects down -24%, and property availability down by -40% year-over-year. With a continued decline each month from the previous year, we see that market conditions are only further tightening meaning that there are fewer apartments available to a large number of renters. Overall demand scores are up across a majority of markets however this is only indicative of the increased average prospects per property due to the imbalance decline of properties and prospects. With more renters competing for a shrinking number of units, overall demand for purpose-built rental apartments continues to rise.
The top 10 markets are excellent indicators of the gradually waning demand we are likely to see moving forward as both the composition of markets and astronomically high growth figures we saw last year are now gone. Moving forward we are likely to see a continued softening of annual growth amongst the top 10 markets.
An Analysis of Key Canadian Markets
In order to better segment our data and analyze what is happening within specific markets across Canada, we have broken down 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.
Key Takeaways:
In August, renter demand decreased by -2.4%, and average leads per prospect increased by +3.9%. While the total number of prospects and available properties have declined month-over-month the competition amongst the remaining renters continues to strengthen. Renters have recognized the increased competition they are facing and continue submitting a greater number of inquiries when looking for new housing leading to greater overall lead volume.
This lead volume is however not being experienced evenly across the country, with some properties beginning to struggle generating leads. More renters move towards more reasonably priced accommodations in favour of more luxury-oriented properties achieving top-of-market rents. Similarly, informal rentals and single-family homes continue to gain interest with more homes becoming available to rent.
Primary Markets (Populations >600K)
Primary Market Drill Down (M/M): August 2022 vs. July 2022
Notable Changes in Primary Markets Over The Past Month
*Overall demand scores are up +2% month-over-month however unique prospects are down by -1.7%, and properties are down by -3.6%
Primary markets saw muted changes in August with a slight decline in overall property availability, and prospects. Although prospects have begun declining in line with the supply of apartments this does little to improve the limited supply of available apartments. This has however not driven renters to secondary markets as the percentage of renters in primary markets across Canada has grown by an additional 2.4% month-over-month suggesting that many still see primary markets as a viable option when settling down.
The ranking this month saw little movement with no new markets appearing likely because the communities already within the list represent the largest rental markets in Canada and as such the greatest demand for purpose-built rental in Canada.
Primary Market Drill Down (Y/Y): August 2022 vs. August 2021
Notable Changes in Primary Market Demand Over The Past Year
*Year-over-year demand scores are up +19% however both prospects and available properties are down -26.5% and -29.7% respectively.
Tighter market conditions resulting from a decline in the number of prospects and a much greater decline in property availability have left overall demand scores up and average prospects per property up +4.5% year-over-year. Rental rates show healthy growth over the last year with a +13.5% increase across one-bedroom units in primary markets.
Many markets have returned to their pre-COVID availability rates and are trending towards substantially tighter market conditions suggesting that while rental affordability remains the hot topic of discussion the much more real and pressing issue affecting primary markets is that of availability.
Secondary Markets (Populations ~600-235K)
Secondary Markets Drill Down (M/M): August 2022 vs. July 2022
Notable Changes in Secondary Market Demand Over The Past Month
*Secondary markets saw the most substantial decline in property availability at -6.7%, while unique renters are down by -2.3%
Much of this list is taken up by Ontario municipalities at 5 of the 8 spots, with the only exceptions being Surrey, Victoria, and Halifax which represent markets with strong rental demand, and a continued tightening of market conditions. These tightened market conditions are in part due to the continued growth in average prospects per property of +4.8% month-over-month which resulted in increased demand scores +5%.
Rent grew by 1.1% in August which is down by -0.7% from July's growth figure with upward pressure still present however gradually lessening and lessening the gains in rents that have been a staple of Canada's rental market for the past 12 months. While July saw a cooling of market conditions in secondary markets, August saw what is likely the end of the 2022 summer leasing season.
Secondary Market Drill Down (Y/Y): August 2022 vs. August 2021
Notable Changes in Secondary Market Demand Over the Past Year
*Overall, year-over-year demand scores are up +10%, while prospects are down by -47%, and properties are down by -45%.
For the first time this year, the year-over-year decline in prospects has outpaced the decline in property availability and resulted in a decline of average prospects per property by -3.3%. This is a substantial departure from the trends previously experienced by secondary markets and may suggest that the growth experienced last year has begun to decline with primary markets once again attracting a growing number of renters. This is further supported by the growth in the percentage of renters inquiring about properties in primary markets.
While demand begins to wane rents continue to grow with a year-over-year growth rate of +14.6% up +0.9% from last month's yearly figures.
Tertiary Markets (Populations ~235-100K)
Tertiary Markets Drill Down (M/M): August 2022 vs. July 2022
Notable Changes in Tertiary Market Demand Over The Past Month
*Demand scores in tertiary markets decreased by -8%, unique prospects decreased by -11%, and available properties decreased by -3.6%.
August once again marks the shift from a gradual reduction in growth to a direct contraction in rental demand within tertiary markets. With a substantially greater decrease in prospects than available properties, overall lead volumes have declined, and average prospects per property are down by -7.7%. Although it was expected that renters would be redirected to tertiary markets with the continued tightening of primary markets, this has not happened and instead tertiary markets are shrinking at a faster relative rate than larger communities.
Tertiary markets also experienced the greatest change in overall ranking not accounting for the loss of 3 markets from July's rankings due to a lack of available properties. The growth in rents continues to slow with a month-over-month average of +0.25% down by half from the previous month, and down 5x from June.
Tertiary Markets Drill Down (Y/Y): August 2022 vs. August 2021
Notable Changes in Tertiary Demand Over the Past Year
Overall, year-over-year demand scores are down by -27%, unique prospects are down by -53%, and property availability is down by -26%
Tertiary markets saw the greatest decline year-over-year, where they were once thought of as an excellent alternative to urban living to a significant proportion of the population they have since seen a shrinkage in their overall market share and in renters' willingness to relocate to smaller communities. These factors resulted in tertiary markets experiencing substantial market loss in August 2022 as compared to August 2021.
Rental growth is in line with larger markets and has begun to slow year-over-year with an indicated growth of 9.75% for one-bedroom apartments year-over-year. This growth is lower than that achieved by both primary and secondary markets. The fanfare of moving to a smaller community is gone, and now that the surge in summer leasing is coming to an end, tertiary markets show the greatest overall decrease in demand. Many households have returned to larger and better-amenitized markets. The push for a return to the office further accelerated this by creating a need to be in proximity to employment centers which once again disincentivized many from looking at tertiary markets for housing.
Conclusion
August likely represented a turning point for 2022's summer leasing season with declining prospect counts, and gradually diminishing lead volumes. The peak in rental demand has come and gone and now we begin the drive towards the end of this year and wait for the next. Demand scores trended upwards this month however when compared to the last 2 months it becomes clear that the strong growth seen in the last 3 months is at the end, with prospects declining alongside property availability markets will continue to tighten however at a lower relative rate with each additional month.
The decline in unique prospects is likely the most important takeaway from August because it likely means that the population of willing renters will either continue to decline as people find homes and rent them or because they have chosen to forgo renting and choose instead to wait in their current homes. The growth in single-family rentals has also continued likely attracting some renters away from the purpose-built rental market with the prospect of more appealing rents with some homeowners looking to safeguard themselves from potential interest rate hikes and the higher mortgages that go along with them.
Unfortunately, the mildly waning demand is unlikely to provide relief to those dealing with a lack of affordability. While prospects may be in decline, this does nothing to ease the existing undersupply of rental apartments across the country, and so long as demand remains greater than the available supply rental rates will continue to grow.
This summer's leasing season after several months of strong growth has finally come to an end, with the inversion of unique prospects, and reduction in demand score growth we are likely to see a slowdown in leasing activity moving forward. Demand will continue to remain strong however, this should not be taken as a sign to relax by those leasing apartments. Property managers should take care when reviewing rental applications to ensure that the tenants you attract are responsible and will set you up for success into the end of this year.
