Rental Market Softens as Temporary Residents Leave Canada

Canada’s rental market is experiencing a significant shift in 2025, marking a departure from the rapid rent increases seen in previous years. Nationally, average asking rents have declined by 1.5% year-over-year as of June 2025, contrasting sharply with the 8–12% annual increases observed between 2022 and 2023. This cooling trend is attributed to several factors, including increased housing supply, slower population growth, and a notable decrease in temporary residents.

Key Drivers of the Rental Market Slowdown

The decline in rental demand is largely driven by the departure of temporary residents, including international students and workers. Stricter immigration policies and a reduction in study permit approvals have played a significant role in this trend, particularly in cities like Vancouver. As a result, rent prices have softened, and vacancy rates have increased in several major urban centers.

Another contributing factor is Canada’s slowing population growth. While cities such as Montréal, Ottawa, and Winnipeg continue to experience rent pressure due to local economic opportunities and moderate population increases, other regions, especially the Atlantic provinces, are seeing a rapid decline in demand for rental housing.

Regional Variations in the Rental Market

The rental market is not uniform across Canada, with distinct trends emerging in different regions and housing types. Purpose-built rental apartments, for instance, have seen a relatively small decline in rents, dropping by just 1.1% annually. In contrast, condominium rentals have experienced a sharper decline of 4.9%, while rents for houses and townhomes have fallen by 6.6%.

Québec City stands out as Canada’s tightest rental market, with an occupancy rate of 99.1%. Despite this, new construction projects are expected to increase rental supply, which may help ease demand pressures over time. Meanwhile, Vancouver, once a hotspot for rental growth, is now experiencing a cooldown, driven by reduced demand from international arrivals.

Economic and Policy Influences

Interest rates and housing affordability are also shaping the rental market. While lower interest rates typically encourage homeownership, high housing prices and affordability challenges are keeping many Canadians in the rental sector. This dynamic is maintaining demand in expensive cities while softening rents in areas where supply has increased.

Supply constraints remain a critical issue. Despite some growth in new rental construction, particularly in regions like Québec, the national supply of rental units is still tight. Construction costs and slow project completions have limited the influx of new rental housing, though recent increases in vacancy rates may provide some relief.

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Outlook for 2025 and Regional Trends

Analysts predict that rent growth will continue to slow or remain flat across much of Canada through the rest of 2025. This trend is largely driven by the slowdown in population growth, particularly the reduction in temporary immigration. However, some regions may buck this trend due to local economic conditions and policy frameworks.

For instance, cities like Calgary may experience modest rent increases due to economic activity and the absence of rent control policies. In contrast, cities with rent control, such as Toronto and Hamilton, are expected to see subdued rent growth due to policy restrictions, high tenant turnover, and the addition of new rental supply.

In Québec, while new construction is expected to boost rental supply, vacancy rates are projected to remain among the lowest in Canada. This is particularly evident in Québec City, where the occupancy rate remains at 99.1%, making it Canada’s tightest rental market.

Meanwhile, Vancouver’s rental market is expected to continue moderating as stricter immigration policies persist. The decline in demand from international arrivals, particularly international students, is a key factor in this trend. This moderation is expected to continue in the near term, with rents potentially stabilizing as supply and demand balance out.

Overall, the combination of slower population growth, reduced temporary immigration, and regional economic dynamics will shape the rental market landscape in Canada for the remainder of 2025 and beyond.

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Conclusion

Canada’s rental market is undergoing a notable transformation in 2025, marked by a slowdown in rent growth and increased vacancy rates. This shift is primarily driven by the departure of temporary residents, including international students and workers, due to stricter immigration policies. Additionally, slower population growth and a rise in housing supply have contributed to this trend. While regions like Québec City continue to experience tight rental markets, cities such as Vancouver are seeing a cooldown. This dynamic highlights the complex interplay of demographic, economic, and policy factors shaping Canada’s rental landscape. As the market continues to evolve, renters and landlords alike will need to adapt to these changing conditions.

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