Toronto rents are nosediving as the city's condo market plunge shows little signs of slowing
Rents are sliding in Toronto, spurred by a big recent slowdown in the city’s condo market that’s seen a surge of new inventory and provided some long-awaited breathing space for renters there.
Overall rent prices slipped by 7.1% in Toronto throughout 2024, according to new Rentals.ca and Urbanation data, and average condo rents across the country were down by a big 5.2% compared with the previous year.
Lower buyer demand for condos, sparked in part by appraisal problems for those who purchased pre-construction products in recent years, is pushing properties into the rental space and offering a much-needed reprieve on affordability and choice for renters.
Canadians trapped in rental markets across many major cities have seen their budgets squeezed during the past decade as rent prices – most notably in Toronto and Vancouver – shot through the roof and far outpaced wage growth.
But despite lower recent prices the challenges facing renters across Canada remain acute, according to CMHC deputy chief economist Kevin Hughes (pictured), who said nonowners still have plenty of hurdles to overcome – with no huge affordability improvement on the horizon.
“We’ve seen a big increase in supply last year, and that has kind of resulted in some markets being a little bit less tight,” he told Canadian Mortgage Professional. “But overall in Canada, we’re still facing a very tight rental market.”
The weak resale and rental market prospects for condo units are likely to slow construction of those apartment types in Ontario in the years ahead, the national housing agency’s latest market outlook showed.
British Columbia, by contrast, will see a “milder and delayed” slowdown in condo construction, while Alberta won’t be as strongly impacted because buyers there tend to be residents rather than investors, CMHC said.
With looming tariffs between Canada and the US, Kevin Lee of CHBA highlights potential disruptions in homebuilding costs and supply chains. https://t.co/7iHXe5eLUC#HousingMarket #TradeWar
— Canadian Mortgage Professional Magazine (@CMPmagazine) February 11, 2025
What will it take to fully restore rental affordability?
Lower immigration and a higher number of first-time buyers throughout the coming three years will reduce rental demand, slow rent increases and increase the number of vacancies in the market, according to CMHC’s report.
“However, rental affordability will take more time to improve,” it added. “Some vacated units will adjust to market rents and renters’ incomes will catch up to previous market rent increases. Additionally, as financially able tenants move to higher-priced new units, more affordable options will gradually open up for other tenants.”
But a slow pace of construction means inventory is unlikely to experience a material improvement in the years ahead despite rental apartment building hitting record levels in 2024 as the renter population swelled and government support increased.
“I think the challenge here is to have incentives for the private sector to get more involved in rental apartment construction but that those incentives are not [hindering] demand, because that’s the equation that is so difficult to balance right now,” Hughes said.
“When you consult many people in that area, the purpose-built rental market segment, they’ll tell you that they would have to see many more incentives for them to want to get into that market. So it remains a challenge and going further into the long term with regard to the increased supply that’s needed to restore affordability.”
What will happen if housing affordability does not return by 2030?
Millions of new housing units need to be constructed by 2030 across the country to restore housing affordability, CMHC has said – but the still-sluggish outlook means that remains a distant prospect at present.
Unless the picture improves dramatically (and unexpectedly) in the coming years, Hughes said a big conversation about shifting trends in Canada’s housing market is on the way.
“I think that we’re probably already at that time – but if we’re not, we’ll soon be at that time where we’re going to have to ask ourselves, ‘If this additional supply does not arrive and if the rate of construction does not significantly increase, then what is the next chapter in terms of the markets in Canada?’” he said.
“What’s likely to happen in terms of affordability or housing market conditions and living conditions in general – or even people being priced out of markets and going into other, less expensive markets? We’ve seen that happen before. That could very well be the case if we don’t see very large increases in supply.”
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