Flood of new construction lower the growth of apartment rents in Canada in 2024

A flood of new rental units slowed the pace of apartment rent increases this year, and that trend is likely to continue in 2025 with another wave of apartment buildings under construction.

 

The average monthly rent of a two-bedroom rental apartment across the country was $1,447 in October, up 5.4 per cent from 2023, according to the annual rental report from Canada Mortgage and Housing Corporation (CMHC), released Tuesday. That compared with an increase of 8 per cent from 2022 to 2023.

 

Among the country’s largest rental markets, Toronto had the smallest increase, with the average monthly rent up by 2.7 per cent in 2024. That compared with an 8.8 per cent rise in 2023. Halifax’s average monthly rent climbed by 3.8 per cent this year compared with 11 per cent in 2023.

 

Vancouver, Montreal and Calgary each had smaller rental rate increases this year compared with 2023, while Ottawa and Edmonton saw rental rates climb at a quicker pace than last year.

 

CMHC said a raft of new rental apartments, also known as purpose-built rentals, kept rental rates from soaring. In most of the major cities, the volume of new purpose-built rentals was well over historical levels. At the same time, thousands of new condo units also came onto the market. (Condos are individually owned, and investors buy them for either price appreciation or rental income.)

CMHC said rental rates are not increasing as quickly in the newer purpose-built rental buildings, which cater to higher-income households. But lower-income renters continue to be under financial duress. The arrears rate, when a tenant is at least one month behind on the rent, was 7.9 per cent on average across the country’s metropolitan areas and 15.4 per cent in Toronto. That was slightly better than 2023, when the national arrears rate was 8.2 per cent, and Toronto’s was 19.6 per cent.

 

“It’s important to know that it is easing up in the newer, more expensive units,” said Tania Bourassa-Ochoa, CMHC’s deputy chief economist. “Those units are very often accessible or affordable to higher-income households but not medium or lower-income households.”

 

Regardless, the slowdown in rent increases is expected to continue into the new year. A record number of purpose-built rental units are under construction and thousands of condo units are due to be completed over the next 12 months. In addition to the increased supply of housing units, there will likely be less demand for rentals from newcomers and residents.

 

“There are signs that could point to weaker demand,” said Ms. Bourassa-Ochoa.

 

The federal government’s foreign student cap went into effect this year. Also, the environment for homebuying has improved. Home loans have become cheaper and new mortgage policies have made it easier for first-time homebuyers to make their monthly payments and buy more expensive properties. That means there may be fewer residents looking for places to rent and more renters vacating their units if they buy a home.

 

 

 

 

This article was first reported by The Globe and Mail