Rental prices drop in major Canadian cities yet affordability still elusive, says CMHC

Faced with longer vacancy periods in several major cities, landlords of purpose-built rentals are introducing incentives such as free rent and moving allowances, according to a new report by Canada Mortgage and Housing Corporation (CMHC), which also noted falling average asking rents in markets like Vancouver, Halifax, and Toronto.

In its mid-year rental market update, CMHC reported that average asking rents for two-bedroom purpose-built apartments declined year-over-year in four of seven surveyed markets. Vancouver saw the largest decrease at 4.9%, followed by Halifax at 4.2%, Toronto at 3.7%, and Calgary at 3.5%. Rents increased in Edmonton by 3.9%, Ottawa by 2.1%, and Montreal by 2%.

The report stated that vacant units are taking longer to lease, especially newly built rentals in Toronto, Vancouver, and Calgary. These units are competing with secondary rental options such as condominiums and single-family homes. Some property owners are responding by offering incentives to attract tenants. The report noted that certain landlords are considering rent reductions over the next few years.

While asking rents for vacant units have dropped in several cities, CMHC said rents for occupied units continue to rise, though at a slower pace compared to the previous year. Tenant mobility has declined, with longer average tenancy periods resulting in higher rent increases when units turn over. In Toronto, the rent gap between vacant and occupied two-bedroom units reached 44% in 2024, while Edmonton recorded the lowest at about 5%.

CMHC expects vacancy rates to increase in most large urban areas in 2025, citing slower population growth and labor market conditions. The agency stated that although supply has increased in some markets, construction of additional rental units is needed to meet future demand and improve affordability over time.

A separate report from Rentals.ca and Urbanation found asking rents for all residential properties in Canada fell 2.7% year-over-year in June to $2,125, the ninth consecutive month of annual declines. Still, average asking rents remained 11.9% higher than three years ago and 4.1% above two years ago.

Asking rents for purpose-built apartments dropped 1.1% to $2,098. Condos declined 4.9% to $2,207, while houses and townhouses fell 6.6% to $2,178.

Provincial declines included 3.1% in both British Columbia and Alberta, 2.3% in Ontario, 1.3% in Manitoba, and 0.9% in Quebec. Saskatchewan saw a 4.2% increase to $1,396.