Canada’s rental market is at a pivotal juncture. In early 2025, the latest Rentals.ca and Urbanation report reveals that the national average asking rent has slipped to an 18-month low of approximately $2,100, marking a 4.4% decline year-over-year. While this downturn raises concerns amid economic uncertainty and oversupply from record apartment completions, emerging markets like Kelowna are demonstrating moderate growth. In this analysis, we break down the contributing factors, property type variations, regional disparities, and what these trends mean for investors, tenants, and real estate professionals.

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Downward Pressure Amid Economic Shifts

Economic uncertainty and shifting demand are creating downward pressure in the rental market. Heightened economic risks and declining international population inflows have led to a cautious rental environment, with consumers adopting a more measured approach to lease commitments. The real estate sector is witnessing apartment completions at multi-decade highs, especially in areas where secondary market rentals (condominiums, houses, and townhomes) dominate. This influx of new inventory is intensifying competition among landlords, pushing average asking rents down.

After 38 consecutive months of annual rent increases, January 2025 marked the fourth straight month of declines. Despite a $96 drop over the past year, average rents remain 5.2% higher than two years ago and 16.4% above levels seen three years ago, highlighting the lingering impact of previous market pressures.

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Analyzing Property Type Variations

The rental market is seeing varied performance across different property types. Secondary market rentals, including condominiums, houses, and townhomes, are experiencing significant declines. Condominiums saw a 6.5% annual drop, while houses and townhomes saw an 8.9% decline due to market saturation. Purpose-built rentals, however, experienced a modest decrease of just 1.7%, indicating more stability in this segment.

In terms of unit-specific trends, studios recorded a slight 0.5% increase, while three-bedroom apartments rose by 2.1%. These niche segments—compact units for urban professionals and larger units for families—continue to attract strong demand despite the overall market softness.

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Regional Disparities

Ontario has experienced the most significant rental drop, with average apartment rents falling 5.2% to $2,329. In Toronto, the largest city in Canada, rents have dropped by 7.6%, reaching a 30-month low of $2,615. This steep decline reflects both market saturation and evolving tenant preferences amid economic uncertainty.

In British Columbia, the rental market is facing a 2.6% decline, but the province remains the most expensive in Canada, with average rents around $2,463. Vancouver has seen a 5.2% decline, with a cumulative drop of 13% since the July 2023 peak, signaling a significant market correction.

Kelowna stands out within British Columbia, with moderate growth in its rental market. One-bedroom units in Kelowna are seeing a 1.2% month-over-month growth and a 2.8% year-over-year increase, with average asking rents at $1,905. Two-bedroom units also exhibit modest growth, averaging $2,382. Kelowna’s appeal as an affordable alternative to larger urban centers, combined with a diversified local economy and improved quality of life, is bolstering demand and providing a buffer against the national downturn. This makes Kelowna an attractive market for both investors and tenants.

Other regions such as the Prairie Provinces (Alberta, Saskatchewan, and Manitoba) have seen 2–3% annual rent increases, thanks to relatively affordable markets and steady local demand. In Atlantic Canada and Quebec, modest declines or near-flat performance suggest a more balanced rental landscape compared to Ontario and Vancouver.

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Municipal-Level Insights and Shared Accommodation Trends

Urban centers like Toronto, Vancouver, and Calgary continue to experience significant declines, with oversupply and shifting demand contributing to the downturn. In contrast, cities like Ottawa and Montreal have seen smaller declines, reflecting more stable local conditions. Edmonton stands out as an outlier, with some unit types even recording slight rent increases.

Shared accommodation listings have expanded dramatically, with a 42% annual increase, particularly notable in Calgary. Despite the increased supply, the average rent for shared accommodations has decreased by 5.3% month-over-month and 7.6% year-over-year, now at $933. This trend highlights a growing market for flexible, affordable living arrangements, driven primarily by students and younger tenants.

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Expert Analysis and Future Outlook

Key factors to consider moving forward include the potential for economic recovery, which could ease the downward pressure on rental prices and pave the way for stabilization or modest growth. However, with new apartment completions continuing at record levels, the market may remain oversupplied until a natural equilibrium is achieved. Markets like Kelowna show how regional demographic shifts, lifestyle migration, and local economic drivers can create pockets of resilience, making them appealing to investors and tenants seeking stability.

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Conclusion

The February 2025 Rentals.ca Rent Report underscores a significant shift in Canada’s rental market, with average asking rents dropping to an 18-month low. Despite economic uncertainty and oversupply, markets like Kelowna are seeing moderate growth, offering opportunities for investors and tenants. Coldwell Banker Horizon Realty remains committed to delivering data-driven insights to help clients navigate this evolving market. Stay informed with our expert commentary and reports throughout 2025.

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Source: Rentals.ca and Urbanation, based on monthly listings from the Rentals.ca Network of Internet Listing Services (ILS).