As the Canadian rental market grapples with ongoing adjustments, the latest findings from Rentals.ca and Urbanation reveal a notable drop in asking rents. January saw a two per cent year-on-year decline, bringing the average rent to $2,057. This marks the 16th consecutive month of falling rents, with the current figures representing the lowest levels seen in over two and a half years.
A Shift in Rental Affordability
The comprehensive report highlights that not only have rents decreased, but they have also dropped by 6.3 per cent compared to two years ago. Despite this decline, the average rent remains 12.9 per cent higher than pre-pandemic levels. Interestingly, the improved affordability has seen the average rent-to-income ratio dip below the 30 per cent threshold for the first time in six years. Shaun Hildebrand, president of Urbanation, commented, “There has been a meaningful improvement in affordability for renters in Canada, proving that more supply brings down costs.” This trend is likely to attract more tenants into the market, even amidst a slowdown in population growth.
Unit Sizes and Rental Trends
One contributing factor to the declining rental prices is the shrinking size of rental units. In January, the average size of rental listings fell to 857 square feet, down from 885 square feet the previous year. This trend reflects a broader shift in the market, as landlords adjust to changing demands and tenant preferences.
When examining specific types of rentals, condo units experienced a 5.7 per cent annual decline, with an average asking rent now at $2,093. Meanwhile, rents for houses and townhouses fell by 3.1 per cent, reaching an average of $2,078. Interestingly, three-bedroom rentals bucked the trend, experiencing a slight increase of 1.1 per cent to an average of $2,506. Within the purpose-built rental category, three-bedroom units saw an even more significant rise of 3.9 per cent, averaging $2,756.
Regional Variations in Rental Prices
Across Canada, the decline in average rents varied significantly by province. British Columbia saw the largest decrease at 4.7 per cent, followed closely by Alberta at 4.3 per cent, Ontario at 3.3 per cent, and Quebec at 2.6 per cent. All six of Canada’s major rental markets reported annual rent reductions last month.
In Vancouver, rents fell by an impressive 9.2 per cent year-on-year to an average of $2,630. Calgary’s rental market saw a 5.7 per cent decline, bringing average rents to $1,815. In Toronto, rents decreased by 4.6 per cent, with the current average at $2,495. Ottawa, Montreal, and Edmonton also reported declines of 4.8 per cent, 3.7 per cent, and 2.6 per cent, respectively.
Why it Matters
The continuing drop in rental prices across Canada signals a significant shift in the housing market, offering much-needed relief to tenants facing financial pressures. As affordability improves, the potential for a more stable rental environment increases, which could foster a healthier balance between supply and demand. This trend not only benefits current renters but may also encourage new tenants to enter the market, revitalising rental communities as the country navigates the post-pandemic landscape.