Canada's rental market in 2025: vacancy up, rent growth cooling

Canada's rental market shifted noticeably in 2025. Per the Canada Mortgage and Housing Corporation's 2025 Rental Market Report — the most comprehensive annual survey of the purpose-built rental stock — the national vacancy rate rose to 3.1%, up from 2.2% in 2024 and above the national 10-year average. Rent growth slowed but did not reverse: the average rent for a two-bedroom purpose-built apartment grew 5.1% to $1,550.

Why vacancy rose: supply finally caught up to demand

The key driver was a wave of purpose-built rental completions. Canada delivered historically high numbers of new units in 2024 and 2025, while population growth slowed relative to 2022–2023 peaks as the federal government trimmed international student and temporary worker targets. The result was more units chasing a relatively smaller pool of new renters.

City-by-city: who is at or above balance

The CMHC 2026 Mid-Year Update, published June 9, 2026, introduced market-specific balanced vacancy ranges — the band where inflation-adjusted rent growth is close to zero. As of October 2025, several major markets are at or above their balanced range.

• Vancouver: 3.7% vacancy — highest since 1988, above the balanced range of 2.0–3.0%. Asking rents fell to an index of 89.8 (Q4 2025) from the Q1 2024 baseline of 100.
• Toronto: 3.0% — first time at this level since before the pandemic. Asking rent index fell to 93.7.
• Calgary: 5.0% — stable but well above its balanced range (3.0–5.5%), with the fastest-growing supply stock in decades.
• Montreal: 2.9% — average rents grew 7.2%, driven by renewals, not turnover. Montreal remains the tightest major market.
• Ottawa: 3.0% vacancy. Asking rents under modest downward pressure.
• Halifax: 2.7% — still near the bottom of its 3.0–4.5% balanced range; conditions remain tight.

Turnover rents vs. renewal rents: the spread that matters

The 5.1% national average rent growth in 2025 obscures a meaningful split. Units that turned over repriced at much higher rates than renewals. In markets with falling asking rents (Vancouver, Toronto, Calgary), landlords with high turnover are facing downward pressure; those with stable, long-term tenants are seeing slower but positive growth. Managing that turnover exposure — knowing which leases are at risk and at what gap to market — is one of the most practical things software can do in a softening market.

What managers should do in a loosening market

• Retention beats vacancy: the cost of finding a new tenant is always higher than retaining one, especially when asking rents are falling.
• Know your rent-to-market gap: units significantly below market may still push renewals; units above it face real risk.
• Tighten maintenance response: tenant experience becomes a competitive differentiator when vacant supply rises.
• Review concession policies: in markets like Calgary and Vancouver, landlords are offering incentives to fill units. Know your floor before advertising.

US context: similar dynamics, different regulatory frame

The US Sun Belt ran through its own supply surge in 2024–2025, with cities like Austin, Phoenix, and Nashville posting vacancy rates above 10% as new apartment supply hit multi-decade highs. Rent growth turned negative in many markets. The pattern is the same — supply catching up to post-pandemic demand — but without provincial rent-control overlays, US markets adjust faster and more sharply in both directions.

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