The Canadian rental market heads into 2026 on softer footing as slowing population growth meets a rise in new completions. Falling rents across most cities confirm that the era of synchronized national rent inflation is over.
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For years, the story of Canada’s rental market moved in only one direction. Rents climbed. Competition intensified. Vacancy vanished. In city after city, tenants adjusted expectations downward while landlords discovered that pricing power, once gained, could be exercised almost without resistance. That cycle is now breaking. The latest national rent data from Statistics Canada confirms that a structural transition is underway. Rents are falling across much of the country at the same time that population growth has slowed to a near standstill and new supply is finally arriving at scale. The consequences of that overlap are beginning to surface in price, leverage, and bargaining power.
This moment matters because it marks the first broad-based cooling of Canada’s rental market since the pandemic recovery began. The forces that pushed rents relentlessly higher have weakened. New forces are now exerting pressure in the opposite direction. The result is not yet a collapse, but it is no longer a one-way market. For renters, investors, developers, and policy makers, the balance of control is quietly shifting.
Rents Are Falling Across Most Canadian Cities
By the third quarter of 2025, the national pattern had become difficult to ignore. Average asking rents for two-bedroom apartments were lower than a year earlier in 24 of the 40 census metropolitan areas that report data. See the chart below, courtesy of Statistics Canada for details. The declines extended across the country’s largest and most expensive rental markets.
In Toronto, the average asking rent for a two-bedroom unit fell to $2,720. That represents a year over year decline of 3.9 per cent and places rents well below the $2,920 peak reached in late 2023. Vancouver followed a similar path. Average asking rent there dropped 5.9 per cent over the year to $3,190. Montréal also turned lower, though with a more modest decline of 1.0 per cent, landing at $1,930.
These markets anchor the national rental system. When Toronto and Vancouver turn, the entire pricing structure of the country begins to adjust.
This data comes from the Quarterly Rent Statistics program produced by Statistics Canada in collaboration with Canada Mortgage and Housing Corporation. The program tracks asking rents from major rental platforms and remains classified as experimental. Even with that caveat, the direction of change is clear. The long period of synchronized rent acceleration has ended.
Where Rents Are Still Rising
Not every market is cooling at the same pace. The Prairie cities remain a notable exception. In the third quarter of 2025, rents continued to rise across Saskatchewan and Manitoba. Saskatoon posted a 6.0 per cent annual increase. Winnipeg followed with a 4.5 per cent gain. Regina recorded a more modest but still positive rise of 2.1 per cent.
Other regional outliers also moved higher. Drummondville in Quebec saw rents surge 11.5 per cent. Greater Sudbury increased 7.1 per cent. Nanaimo rose 6.6 per cent. These markets share a common trait. They have either tighter supply pipelines, less exposure to the recent condo construction wave, or demand bases that have not softened to the same degree as the large metro centres.
This divergence underscores a key reality of this phase of the cycle. The national rental market is fragmenting back into regional submarkets. The national upswing has ended. Local fundamentals are retaking control.
Why the Rental Market Is Turning
The rent reset unfolding across much of the country is not the product of a single shock. It reflects the slow convergence of two powerful forces that rarely move in tandem. Demand has weakened. Supply has finally arrived.
Population growth slowed to just 0.1 per cent in both the first and second quarters of 2025. Those were the weakest quarterly growth rates since 2020. The slowdown carries direct implications for rental demand because non permanent residents, including international students and temporary work permit holders, have been one of the fastest growing sources of renters over the past decade. Their decline reduces the marginal demand that once absorbed each new unit almost instantly.
At the same time, supply has increased. In the first three quarters of 2025 alone, more than 148,000 new dwellings were completed across Canada’s major metropolitan areas. Over 64,000 of those units were purpose built rentals. Nearly 44,000 were condominiums, many of which ultimately entered the rental pool through investor ownership.
This is the first period in years when population growth and construction have moved in opposite directions. That inversion matters. Rental markets remain intensely sensitive at the margin. Even small mismatches between new supply and new demand can reshape pricing behavior quickly.
Toronto’s Rental Reset
Toronto provides the clearest example of how these forces now intersect. The city entered 2025 with a resale housing market that had already been weak for more than two years. Sales volumes remained subdued. Average selling prices drifted lower. Transaction liquidity tightened.
That weakness altered the incentives facing many owners. In past cycles, investors and end users alike could rely on resale exits. In the current environment, selling often means accepting a lower price than expected. For some owners, particularly condo investors, leasing became the more defensible option. That choice increased the number of rental listings at the same time that renter demand was softening.
The result appears directly in the rent data. Toronto’s average two-bedroom asking rent fell nearly 4 per cent over the year. The decline was not driven by distress alone. It arose from growing competition among landlords in a weaker demand environment. The number of non permanent residents in Ontario declined in early 2025, removing a source of consistent absorption that had underpinned the market through the post pandemic rebound.
The Room Rental Market Is Also Softening
The adjustment is not confined to full apartment units. Individual room rents also weakened across many metropolitan areas. 16 of the 39 markets with available data posted year over year declines (see the chart below, courtesy of Statistics Canada). British Columbia led the pullback. Vancouver saw room rents fall 4.5 per cent. Nanaimo declined 4.6 per cent.
Room rentals tend to be highly sensitive to student flows and short term labor mobility. Their softening aligns closely with the broader decline in the non-permanent resident population. Where that demand retreats first, pressure on room rents tends to follow quickly.
Not every market moved lower. Sherbrooke posted an eight per cent increase. Brantford rose nearly seven per cent. These pockets of strength again reflect localized supply constraints rather than a return to national momentum.
What This Means for Stakeholders
For renters, leverage is finally returning. The ability to negotiate, to compare multiple units, and to demand concessions is becoming more common in the large metropolitan areas. The shift is subtle but real. It marks the end of the era when tenants simply absorbed whatever price came next.
For developers, the risk profile has shifted. The arrival of large volumes of purpose built rental supply into a slowing demand environment introduces an absorption challenge that was largely absent during the surge phase. Projects that penciled under relentless rent growth now face a more nuanced leasing horizon.
For agents, leasing volumes and expectations must adjust to a slower market where time on market lengthens and pricing discipline matters more than momentum.
Takeaways
The most important takeaway from the 2025 rent data is not that rents are falling. It is why they are falling. Canada has entered a phase where demographic acceleration is no longer doing the work of market clearing on its own. Supply is arriving into an environment of slower population growth. That shift alters the pricing mechanism across the entire housing system.
This does not imply a uniform national downturn. The Prairie cities demonstrate that undersupplied markets can still support rent growth. What it does imply is that the era of synchronized national rent inflation is over. From here, outcomes will be regional, capital will be more selective, and leverage will matter more than it did during the expansion phase.
To sum up, I would say that the Canadian rental market is normalizing. After years of one-directional pressure, pricing is once again being set by the interaction of supply and demand rather than by demand alone.
Frequently Asked Questions (FAQs)
1. Why is the Canadian rental market softening?
The Canadian rental market is softening because population growth slowed to just 0.1 per cent in the first and second quarters of 2025, while housing supply rose. At the same time, more than 148,000 new dwellings were completed in Canada’s major metropolitan areas in the first three quarters of 2025, sharply increasing rental market competition.
2. Is the rental market cooling across all Canadian cities?
The rental market has cooled in 24 of the 40 census metropolitan areas with available data. Major cities such as Toronto, Vancouver, and Montréal all recorded declining rents in the third quarter of 2025. However, Prairie rental markets remain strong, with Saskatoon up 6.0 per cent, Winnipeg up 4.5 per cent, and Regina up 2.1 per cent year over year.
3. How is population growth affecting the rental market?
Population growth is directly shaping rental market demand. In early 2025, Canada’s population growth slowed to just 0.1 per cent, the weakest pace since 2020. This slowdown reduced demand from non-permanent residents, who have been one of the fastest-growing renter groups over the past 10 years, applying immediate pressure to the rental market.
4. What does rising housing supply mean for the rental market?
Rising housing supply is reshaping the rental market by increasing competition among landlords. In 2025, more than 64,000 purpose-built rental units and nearly 44,000 condominiums were completed, many of which entered the rental market. This level of new supply is now overwhelming the absorption capacity that existed during the post-pandemic spike.
5. What does the shift in the rental market mean for renters and investors?
For renters, the shifting rental market means rents are now falling in the country’s largest cities, including Toronto down 3.9 per cent, Vancouver down 5.9 per cent, and Montréal down 1.0 per cent year over year. For investors, the rental market now requires more conservative underwriting as pricing power weakens and competition among landlords intensifies.
ABOUT THE AUTHOR
Daniel Foch is the Chief Real Estate Officer at Valery, and Host of Canada’s #1 real estate podcast. As co-founder of The Habistat, the onboard data science platform for TRREB & PropTx, he has helped the real estate industry to become more transparent, using real-time housing market data to inform decision making for key stakeholders.
Daniel is a trusted voice in the Canadian real estate market, regularly contributing to media outlets such as The Wall Street Journal, CBC, Bloomberg, The Globe and Mail, Storeys and Real Estate Magazine (REM). His expertise and balanced insights have garnered a dedicated audience of over 100,000 real estate investors across multiple social media platforms, where he shares primary research and market analysis.