For Canadian renters, it may feel like the years since the COVID-19 pandemic have brought one hit after another. A for rent sign is displayed on a house in Ottawa on Friday, Oct. 14, 2022. THE CANADIAN PRESS/Sean Kilpatrick
As Canada continues to grapple with the aftermath of the COVID-19 pandemic, the rental market has felt the squeeze as housing costs surged year after year. After a notable 4.6% increase in rental prices in 2021, the trend accelerated in 2022, with rents climbing by 12.1%. This pattern persisted into 2023, with average asking rents rising by another 8.6%. The situation has left many renters questioning when the escalating costs will subside.
However, there’s a silver lining on the horizon for tenants. Experts predict that the Canada rental market could see a slowdown in 2025, thanks to a combination of factors. A key element is the anticipated increase in rental supply, as well as a potential shift in demand, with some renters looking to purchase homes instead.
The rapid rent hikes of the past few years are expected to decelerate as the housing market begins to stabilize. According to Giacomo Ladas, spokesperson for Rentals.ca, "Rental prices are so expensive, like, they've blown up," referring to the unprecedented growth. Data from Rentals.ca shows a decline in rental prices, with average asking rents dropping by 3.2% nationally to $2,109 in December 2024, marking the lowest level in 17 months.
This drop was most evident in Canada's two most expensive cities, Toronto and Vancouver, which led the way in rent reductions. RBC economist Rachel Battaglia also observed a turning point in the rental market, noting that October 2023 was the first month in three years that rental prices showed a dip.
Several factors are contributing to this slowdown. On the demand side, economic and labor challenges are making people more hesitant to move. Many renters are choosing to stay put rather than face the high cost of relocation. "People have been trying to stay put," said Tim Hill, a Vancouver-based real estate agent. "If they had a good monthly rent, they were staying there for as long as they possibly could."
Population growth, a significant driver of rental demand, has also slowed, partly due to the federal government's reduced immigration targets. Battaglia noted that newcomers traditionally account for a large portion of renters, and the weakening labor market may further delay household moves into rental properties.
Looking ahead, TD economist Rishi Sondhi predicts that rent growth will ease to a more moderate 3-4% in 2025. He also highlights that falling interest rates will likely encourage more people to buy homes, reducing competition for rental units. "Interest rates are also likely to push lower in 2025, helping renters make the transition to home ownership," Sondhi said.
Moreover, Canada’s rental market will benefit from increased supply. The country experienced its largest gain in purpose-built rental housing in over 30 years in 2024, with more construction projects slated for completion in 2025. According to Canada Mortgage and Housing Corporation (CMHC), the average rent for a two-bedroom purpose-built apartment grew 5.4% to $1,447 in 2024, a slower pace compared to the 8% increase in 2023.
Despite these positive signs, the rental market remains tight, especially for affordable units. CMHC's Tania Bourassa-Ochoa explained that while newer, higher-end units have more vacancies, lower-priced properties continue to face extremely low availability.
While 2025 may bring some relief for renters, particularly in terms of more affordable options, experts caution that the overall housing shortage will persist. High demand for rental units in major cities and the time-consuming nature of new construction projects mean that it will take years to fully address Canada’s housing affordability crisis.
In the meantime, experts agree that policymakers should seize this moment of slower population growth as an opportunity to accelerate the construction of new housing. As Battaglia put it, "This is an opportunity to really speed up the construction of new rentals."
