Rent growth has slowed and vacancy rates are rising, report reveals
For those renting – or hoping to rent – a home in Canada’s priciest cities, affording to do so amid the high cost of living has been a big challenge. But are things changing?
For investors in rental homes, the past year has seen opportunities for strong returns and potential for investing in purpose-built rental properties as demand intensified.
But as we head towards what could be a buoyant spring market for residential real estate sales, a report this week suggests that the rental market is showing signs of slowing, with rent growth easing as vacancy rates rise.
Yardi Canada’s latest multifamily rental report for Q1 2025 shows that the national vacancy rate has hit its highest since 2020 at 3.6%, driven by bachelor units.
Meanwhile, the report notes that, while “Canadian apartment fundamentals will remain strong in 2025, rent increases are waning due to slowing population growth and worsening affordability.”
Greater supply of rental units was seen last year. Through three quarters of 2024, national apartment completions rose 28.2% year-over-year to 63,000 units, while starts increased 20.3% to 68,000 units.
While the average national in-place rent increased by $18 in the fourth quarter of 2024 to $1,565 and rose $85 over the last four quarters, growth fell by 40 basis points during the quarter to 5.8% and declined 70 basis points over the year.
"The increase in vacancy rates and moderation of rent growth signal a significant shift in Canada's rental market dynamics,” said Peter Altobelli, vice president and general manager of Yardi Canada. “These trends suggest some easing of the intense competition we've seen in recent years, but affordability challenges remain at the forefront. Collaborative efforts between developers and policymakers will be critical in addressing the evolving needs of renters across the country."
The annual turnover rate rose slightly to 23.1% but remains historically low, reflecting steady rental demand. The report acknowledges the potential risk from economic challenges including tariffs, but also notes that easing inflation and interest rates, together with Canadian households’ savings could be deployed.
