Canada’s multifamily market maintained a strong performance through 2023, and more of the same is expected this year given current supply-demand dynamics. While last year’s national average in-place rent increased 6.5 per cent to an all-time high of $1,480, the vacancy rate dropped to 2.7 per cent, the lowest level it’s been in years.
None of this bodes well for those seeking affordable rental accommodations, particularly given the heightened demand is expected to persist into 2024. The good news, according to Yardi’s Q1-2024 Multifamily Report, is that a consensus has emerged around the need to build more rental housing. Both the federal and provincial governments have upped their efforts in recent months to stimulate new supply by exempting developers from the 5 per cent GST and 13 per cent HST in Ontario; the federal government also deployed a $4 billion Housing Accelerator Fund. But as Yardi points out, despite these and other new measures to bolster purpose-built rental development, “Starts are declining due to increasing costs of construction materials and labour, and the difficulty in lining up debt.”
2023 rental data
In terms of rent growth, Alberta led the provinces in 2023 with 10.4 per cent year-over-year increase, driven by Calgary (up 13.4 %) and Edmonton (up 7.9 %). The national growth rate for lease-over-lease rents—which represent new leases on units that are re-leased after becoming vacant—moderated slightly in Q4 2023 but remained high overall, rising 12.2 per cent annually. As Yardi noted, the quarterly decline was the first of its kind since Q1 2021, speculating that “it may be a sign that rents are peaking due to the trickle of new supply or the impact of affordability.”
Meanwhile, new lease rent growth was strong across Canada, topping double digits in nine of the 12 cities and five of the seven provinces tracked by Yardi. Year-over-year growth was highest in Nova Scotia (16.1%) and Ontario (15.8%), while Toronto led among the cities with an 18.5 per cent increase due to its rapidly rising population. The weakest growth for new leases was recorded in Manitoba (3.4%)—something Yardi attributes to “Winnipeg not experiencing the robust gains seen in other cities.”
In Quebec, rent growth remained strong at 6.8 per cent, but this is lower than other parts of the country. Montreal, known for its the large student population and pool of educated workers drawn to the city’s diverse economy, has seen a slowing in population growth recently due to rising tuition costs and fewer permanent immigrants relative to other provinces because of French language requirements.
After slowing in the second half of 2023, Yardi predicts Canada’s economy will remain weak through the first half of 2024. GDP growth was roughly 1.0 per cent in 2023 but isn’t expected to reach that level again this year given the constraints consumers have faced with inflation and increasing debt-service costs. Though Canada added more than 430,000 jobs in 2023, only 43,000 were added in Q4-2023. Canada’s unemployment rate currently sits at 5.8 per cent.
How Canada compares to the U.S.
Both Canada and the U.S. saw strong demand and rent growth in 2021 and 2022 following the pandemic, but last year, Canada’s rent growth increased while it flattened in the U.S. A big factor, according to Yardi, was the sharp supply response in the U.S. that led to the construction of 1.2 million apartment units now underway, and more than 1 million units to be delivered over the next two years.
In contrast, there has been a disconnect between housing and immigration policies in Canada. Housing construction remains weak while the populations is growing at a much faster rate than it is in the U.S. Consequences of this include rapid rent growth, households migrating in search of more affordable locations, and renters staying in place longer to avoid substantial increases in housing costs.
For the full report, click here: Yardi Multifamily Canadian National Report-Q1 2024.pdf