Get Ready for Lower Rent Prices in 2021 – Here’s Why Markets Are Still Competitive

For Canadian renters, the recent years post the COVID-19 pandemic have been a rollercoaster ride of challenges and surprises.

1. Rental Prices Surge: In 2021, the average asking price for rental units increased by 4.6 per cent, followed by a staggering 12.1 per cent surge in monthly payments in 2022, according to data from Rentals.ca and Urbanation. Asking rents then continued to rise by an average of 8.6 per cent in 2023.
2. Market Cool-Down in 2025: Despite the continuous surge in rental prices, experts anticipate a cooldown in the rental market across Canada in 2025. This shift is expected due to increased supply and many potential renters transitioning to homeownership for the first time.
3. Turnaround in Rental Prices: Recent data indicates a promising turnaround in rental prices. Average asking rents experienced a 3.2 per cent decrease nationally in December, marking a 17-month low. The decline in asking rents was observed chiefly in major cities like Toronto and Vancouver.
4. Factors at Play: Several factors are contributing to the shift in the rental market. Economic and labor challenges have resulted in decreased demand as people are opting to stay put in their current rentals, rather than seek new accommodations. Moreover, the reduced immigration targets set by the federal government have led to slowed population growth, impacting rental demand.
5. Forecasts for 2025: Experts predict a substantial easing in the growth of purpose-built rents to a range of three to four per cent this year. Lower interest rates are also expected to incentivize renters to consider homeownership, resulting in reduced competition for rental properties.
6. Increased Supply: Canada witnessed a significant increase in purpose-built rental supply last year, the largest gain in over three decades. A new wave of supply is set to materialize in 2025, further enhancing the rental market landscape.

In conclusion, while the rental market in Canada has faced unprecedented challenges over the past years, the anticipated cool-down in 2025 and the increase in supply bring a glimmer of hope for renters. Policymakers and stakeholders should capitalize on the current opportunities to accelerate the construction of new housing and address the long-standing issue of rental affordability in the country.