After years of scorching rent growth, conditions shifted in favour of new tenants
Canada’s rental market clearly moved off the boil by January, with average asking rents falling for the 16th straight month to $2,057 – the lowest level in 31 months.
According to the latest National Rent Report from Rentals.ca and Urbanation, the annual decline of 2.0% was modest, but it marks a sharp turn from the pandemic‑era run‑up that strained renter budgets and reshaped housing demand.
Average asking rents are still 12.9% above pre‑COVID levels, yet national rent‑to‑income ratios finally dipped below the 30% affordability threshold, landing at 29.5%.
Smaller units played a key role: the average listing size shrank to 857 square feet from 943 two years earlier, even as asking rents per square foot rose 1.4% year over year to $2.46.
“There has been a meaningful improvement in affordability for renters in Canada, proving that more supply brings down costs,” said Shaun Hildebrand, president of Urbanation. “This should help draw more renters into the market this year, even as the population (growth) slows.”
Soft landing, not a crash
The Rentals.ca data showed broad‑based declines across the six largest markets. Vancouver apartments saw asking rents fall 9.2% year over year to $2,630, Toronto dropped 4.6% to $2,495 and Calgary slid 5.7% to $1,815, with Ottawa, Montreal and Edmonton also lower on an annual basis.
Purpose‑built rentals proved most resilient, down just 1.0% to $2,049, while condo rents fell 5.7% to $2,093 and other secondary units slipped 3.1% to $2,078. Three‑bedroom units were the only category that posted growth, up 1.1% to $2,506.
What it meant for lenders and investors
For lenders and mortgage brokers, new projects and acquisitions need to be underwritten for softer rent growth, higher incentives and more competition for tenants, particularly in large urban centres.
Yardi’s late‑2025 data, showed vacancy for professionally managed apartments climbing and new‑lease growth slowing sharply, even as operating costs per unit continued to rise.
“Canada’s rental market is entering a new chapter,” said Peter Altobelli, vice president and general manager at Yardi Canada Ltd. “We haven’t seen this level of new purpose‑built rental supply in a long time, and it’s already shifting market conditions.”
For experienced borrowers and their advisors, underwriting assumptions now have to balance easing advertised rents with still‑elevated cost pressures, regional divergences – from deep cuts in B.C. and Ontario to ongoing growth in Saskatchewan and Atlantic Canada – and an affordability story that has improved for new tenants but remains challenging for many existing households.
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