Canadian urban rents appear to be declining, according to a recent RBC report
Toronto and Halifax have seen a significant drop in rent for two-bedroom units, with a decrease of $160 and $150 respectively, according to a report by the Royal Bank of Canada (RBC). Meanwhile, in Windsor, which shares a border with Detroit, rents have flatlined.
The report identifies three main factors causing this trend: affordability constraints limiting tenants' ability to pay higher rents, decelerating population growth due to federal government cuts to immigration targets starting in 2024, and increased rental supply, particularly in cities like Toronto and Vancouver.
The cooling rent trend began before recent U.S.-Canada trade tensions but may be further intensified by labour market weakness, slowing wage growth, and reduced immigration related to these trade challenges.
Vancouver experienced the steepest rent declines, followed by Kelowna, Calgary, Toronto, and Halifax, with two-bedroom unit rents dropping by $270, $230, $170, $160, and $150 respectively.
Ontario's manufacturing hubs, including Hamilton, Peterborough, Oshawa, and Windsor, have also seen rents fall. Markets with a high concentration of students, such as Kitchener-Cambridge-Waterloo and Guelph in Ontario, have seen monthly rents fall by $130 and $50 respectively.
The decline in rents was observed in more than half of Canada's 40 major cities compared to the same period a year ago. The report expects rents across Canada to continue to moderate.
Notably, the report suggests that affordability constraints, decelerating population growth, and increased rental supply have contributed to the recent rebalancing of rental market dynamics.
In Kelowna, B.C., two-bedroom unit rents have dropped by $230. Calgary has experienced a $170 drop, while markets like Kitchener-Cambridge-Waterloo and Guelph in Ontario have seen more modest declines.
Despite these recent drops, rents remain elevated in many major cities compared with pre-pandemic levels. Persistent labour market weakness will likely suppress wage gains, while stricter immigration targets continue to slow population growth and limit new household formations.
An unexpected development in New Brunswick is the occurrence of two areas burning 'out of control' with no rain in sight. This news, however, is not related to the rental market trends discussed in the RBC report.
[1] RBC Housing Report
[2] Global News
[3] CBC News
[4] Financial Post
[5] Toronto Star
"In light of the RBC Housing Report, some Canadians might choose to invest in the real-estate sector, particularly in markets where rents have been consistently declining, such as Vancouver, Toronto, and Halifax. Moreover, given the increasing supply of rental properties and slower population growth, there could be potential opportunities for financing real-estate investments."
"Conversely, despite the decreasing rents in several cities, affordability constraints and slowing wage growth might discourage some potential investors from putting their finances into the real-estate market, especially in locations where rents remain relatively high compared to pre-pandemic levels."
