When Will Rent Prices in Canada Stop Rising?

After average asking rents rose 4.6% in 2021, monthly rental costs jumped 12.1% year-over-year in 2022, according to Rentals.ca and Urbanation. Asking rents climbed another 8.6% on average in 2023. Still, industry observers say the national rental market appears to be cooling and could ease further in 2025 as new supply becomes available and some renters choose to buy their first homes.

How did rent costs become so expensive in Canada?

The sharp gains of recent years are unlikely to continue at the same pace in 2025. After two years of unusually rapid increases, several indicators now point to a moderation in rent growth.

“Rental prices blew up in 2022 and 2023,” said Rentals.ca spokesperson Giacomo Ladas. That said, Rentals.ca data already shows signs of a turnaround: average asking rents fell 3.2% nationally to $2,109 in December year-over-year, the lowest reading in 17 months. “There’s a lot more turnover in listings and landlords are offering more incentives again,” Ladas added.

RBC economist Rachel Battaglia noted October was the first month in three years when asking rents across Canada declined, driven largely by drops in Toronto and Vancouver. “We’re at a bit of a turning point,” she said.

What’s driving rental costs to fall

Several demand and supply dynamics are contributing to softer rent growth. On the demand side, economic and labour market strains have reduced the number of people looking for new rentals.

“Many people have been staying put,” said Tim Hill, a Re/Max All Points Realty agent in Vancouver. “If tenants had reasonable rents, they were reluctant to move and locked in those leases for longer.”

Slower population growth after the federal government trimmed immigration targets is also likely dampening rental demand. “Newcomers make up a disproportionately large share of renters,” Battaglia said. “A weaker labour market may also encourage households to consolidate or delay moving into rentals—fewer young people move out of their parents’ homes or they choose shared housing.”

Renters to benefit from interest rate cuts, too

TD economist Rishi Sondhi expects purpose-built rent growth to slow to roughly 3%–4% this year. He projects that falling interest rates will encourage more prospective buyers to enter the housing market, reducing competition for rentals.

“Lower interest rates in 2025 should make it easier for renters to transition to homeownership,” Sondhi said. “They will also reduce borrowing costs for landlords, which could limit the pressure to pass higher costs on to tenants.”

Rental supply grows, giving renters more options

On the supply side, a substantial increase in new rental construction is expected to ease tightness in some markets. Last year saw Canada’s largest gain in purpose-built rental supply in over three decades, the Canada Mortgage and Housing Corporation (CMHC) reported, and Sondhi says another wave of new units is scheduled to reach completion this year.

CMHC data shows the average rent for a two-bedroom purpose-built apartment rose 5.4% to $1,447 in 2024, compared with an 8% increase in 2023. CMHC measures actual rent payments rather than asking prices, which are often higher. Over the same period, the country’s stock of purpose-built rental apartments grew about 4.1% year-over-year.

“Newer, higher-priced units have a higher vacancy rate, while more affordable properties remain in very short supply,” said CMHC deputy chief economist Tania Bourassa-Ochoa. “Affordability challenges persist, and in many cases have worsened for lower-cost options.”

Ladas cautioned that most major cities still face an undersupply of rental homes, so any relief for tenants in 2025 may be limited or temporary. “In the first half of 2025, the most affordable markets will likely continue to see strong demand while the most expensive markets soften,” he said. “But the downward move in rents may not be permanent—new high-rise developments take years to build, and many of last year’s completions began when borrowing costs were much lower during the pandemic.”

Higher interest rates over the last two years may also have slowed construction momentum, which could prolong long-term undersupply, Ladas added.

CMHC noted the total number of housing starts rose 2% in 2024 versus 2023, helped by record rental construction. Among Canada’s six largest census metropolitan areas, starts fell 3% overall in 2024 as activity in Vancouver, Toronto and Ottawa declined, while Calgary, Edmonton and Montreal recorded increases—partly driven by strong rental starts.

Battaglia said the current slowdown in population growth presents policymakers with a “golden opportunity” to accelerate the construction of new housing. “We’ve made progress on adding rental units, but this is the time to speed up and scale up delivery,” she said.

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