Canadian rents continue to fall but a lack of demand hasn’t been the driver. Rentals.ca and Urbanation data shows asking rents fell in September. This marked a 24th straight month of declines, mostly in condo apartments. However, more than half the drop within the past two years was due to shrinking unit size.
Canadian Rents Have Dropped For 2 Years Straight
Source: Rentals.ca; Urbanation.
The average asking rent for all unit types fell for a 24th straight month to $2,034/month in September. That brings prices 4.2% lower than last year, and 9.2% (-$168) below the May 2024 peak. While last month was the weakest September since 2022, asking rents are still 16.2% higher than they were in 2021.
“According to Statistics Canada, average weekly earnings in Canada have risen by 19.4% over the past five years, indicating a general improvement in rental affordability,” explains the author of the report. However, recent Bank of Canada research shows wage gains are concentrated in older households. That’s not quite the relief suggested in the headline.
The slump is primarily in Ontario (-4.8% y/y), Manitoba (-3.2%), B.C. (-2.9%), and Alberta (-2.6%). Meanwhile, in Atlantic Canada (+3.5% y/y), where studio (0-bedroom) apartments came in a mind-boggling 34.5% higher. Inflation has also been tracking much higher on the East Coast. Clearly, rent is one of those factors.
Mom and Pop Investors Are Seeing Rents Fall Fastest
Mom and pop investors are getting a reality check. Asking rents for condo apartments fell 7.8% y/y to $2,052/month, while secondary low-rise units fell 7.4% to $2,016/month. In contrast, purpose-built units only fell 2.7% to $2,036/month over the same period.
The report didn’t dive into the reasons behind the divergence, but there are some obvious factors at play. The recent low-rate boom produced a large number of cashflow negative speculative landlords (a.k.a. speculords). They’re likely less prepared to hold out than institutions. Taxpayer-funded bailouts and loans for institutions also push the odds in their favor.
Canadian Renters Are Paying Less Because They’re Getting Less
Now for the bitter truth—landlords are asking for less because they’re providing less. The average rental unit shrank to 852 sqft in September, down 4.2% over the past two years. That explains more than half of the 7.3% drop in average asking rents over that period. A falling headline number is amplified by the shrinking apartments offered.
Falling average rents are tricky, not unlike the average income as we mentioned above. The drop is influenced more by smaller units than it’s driven by an actual correction. There’s been little progress over the past two years, and a massive disconnect still remains.
