Trump’s tariffs threat seems to have impacted rents in Canada, as they declined from peaks and could still drop further
When Toronto real estate agent Ruchi Jain was helping a couple look for rentals last week, one detail stood out: nearly every unit had clearly been vacant for months.
Landlords, meanwhile, have been signalling to her that they’re open to finding a way to come to an agreement with prospective tenants. Negotiating rents or shorter terms? It’s all on the table.
“I’ll be very honest, people are scared right now,” said Ms. Jain, who said landlords are dealing with downward pressures in the rental market in a way that hasn’t been seen for years.
One of the latest factors on the minds of landlords and renters alike is the economic uncertainty around U.S. President Donald Trump’s threats to implement 25-per-cent tariffs on Canadian goods and the impact it could have on the economy.
It’s a big change from just a year ago when Toronto’s overheated market had prospective tenants outbidding each other for apartments with sky-high prices. Rentals.ca spokesperson Giacomo Ladas said listed rents have been dropping for 12 consecutive months in Toronto and 14 months in Vancouver. Average Toronto apartment rents have dropped 7.6 per cent from their peak to $2,615, and Vancouver rents have fallen by 13 per cent from their peak to $2,896.
National rental rates are still 16.4 per cent higher than three years ago, but real estate agents and analysts say the threat of Mr. Trump’s tariffs on the country and their potential to send Canada into a recession could lead to rents dropping even further.
It would be another downward pressure on a rental market that is already seeing demand weaken as international migration numbers plummet and Canadians look to cheaper communities. At the same time, supply has strengthened as a larger-than-usual number of rental units completed construction recently.
CIBC deputy chief economist Benjamin Tal said the steel and aluminum tariffs that Mr. Trump implemented this week would have only a small impact on bringing rental prices down, even if Canada retaliates.
On the other hand, the full-blown implementation of tariffs on Canadian goods (which has been delayed until the end of the month), followed by retaliations from Canada, could throw the economy into a recession. Multiple Canadian economists have said the country’s gross domestic product could take a hit around two or three per cent.
“Historically in a recession, rent inflation slows down,” said Mr. Tal, who added that he believes rent inflation has already hit the peak of what Canadians can realistically afford.
The potential inflationary effects of the tariffs and their impact on the job market has not been realized yet, but Ms. Jain says she is already hearing from landlords, especially those who are part of Toronto’s beleaguered condo market, that are struggling to fill their units at advertised prices.
Other landlords are doing everything they can to keep their current tenants from looking for deals elsewhere, including negotiating rent decreases, something that not too long ago would have been unimaginable.
On the other hand, Mr. Ladas of Rentals.ca says his main concern about potential tariffs is that they could actually inflate rental prices down the road.
This is because the elevated cost of building during a trade war could push developers to either delay or abandon their housing projects, potentially leading to a squeeze in supply.
Mr. Tal said a prolonged trade war could result in these inflationary impacts being felt in markets by 2026 or 2027.
John Pasalis, president of Realosophy Realty, said that while he expects Toronto’s glum rental market to continue (particularly in the condo sector), he thinks the economic uncertainty from south of the border could lead people to delay a large real estate transaction and continue to rent for a little bit longer.
However, Ms. Jain argues tenants have a clear opportunity to search for a deal, especially if they signed a lease during peak periods and want to shop for a cheaper rental.
“There is a lot out there, so if you’re considering moving, now is certainly a good time to look and be a little bit picky because of how much is on the market,” she said.
This article was first reported by The Globe and Mail
