Rents have fallen across plenty of Canada's major urban centres, brightening the affordability picture for first-time buyers
Canadian tenants are finally catching a break as rental prices decline across more than half the country’s major urban centres, marking a significant shift from years of steep increases.
A recent Royal Bank of Canada (RBC) analysis shows rents are now falling in more than half of Canada’s 40 Census Metropolitan Areas compared to a year ago, with Vancouver leading the retreat. The city recorded the steepest year-over-year drop in the first quarter for two-bedroom units, falling $270.
Other major markets showing significant declines include Kelowna with a $230 drop, Calgary down $170, Toronto falling $160, and Halifax decreasing $150 for two-bedroom units.
The rental retreat embodies a notable change from the post-pandemic recovery period when rapidly growing wages and large inflows of international arrivals drove up demand for Canadian housing, including rentals. During that period, more than one-third of Canadian metropolitan areas reported annual rent increases of at least 20% at some point over the past three years.
The current softening reflects several converging factors that have helped rebalance rental market dynamics in recent quarters. Affordability constraints have limited tenants’ ability to pay higher rents, while population growth has begun to decelerate. Additionally, increased rental supply has provided more options for renters.
Peak of affordability crisis
The rental market had reached crisis levels during the post-pandemic period. Vacancy rates plummeted to their lowest point on record at 1.5% in 2023, according to Canada Mortgage and Housing Corporation data. Average rent for two-bedroom purpose-built units increased 8% in the 12 months to October 2023, the highest rate of increase since at least 1990.
During the peak rental crisis, turnover units saw even more dramatic increases, with average rent growth reaching 24% nationally. Vancouver experienced 34% growth, Calgary 20%, and some Ontario markets like Toronto saw increases north of 40%.
The rental squeeze had serious affordability consequences. Nationally, 8% of purpose-built rental stock fell into arrears, with Ontario seeing 16% of rental households behind on payments. In Toronto and London, at least one in five purpose-built rental households were behind on rent.
The current decline in rents offers relief to tenants who faced unprecedented rental cost pressures during the pandemic recovery. However, the rental market remains tight in many areas, and the recent moderation may help restore some balance between supply and demand that had been severely disrupted during the housing crisis.
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