Canada’s Rental Market in 2021: Expert Predictions, Evolving Trends, and the Search for Value

The Canadian rental market is poised for a dynamic year, marked by an initial dip in rental prices before an anticipated rebound. According to a new report from Rentals.ca, asking rents across the nation are expected to continue their downward trajectory for the first few months of 2021. However, this trend is projected to reverse course, with a significant increase of three percent by the year’s end. This forecast signals a crucial period for both tenants seeking value and landlords adapting to changing market conditions.

Major metropolitan areas are also expected to witness notable shifts. Toronto is forecast to see a four percent increase in asking rents, Montreal a substantial six percent rise, and Vancouver a three percent bump. In contrast, Calgary is predicted to maintain flat rental rates, indicating a more stable, albeit less growth-oriented, environment for renters and property owners in that city. These varied predictions underscore the complex, multi-faceted nature of Canada’s diverse housing landscape, influenced by regional economic factors, population dynamics, and the lingering effects of the global pandemic.

The Rise of Tenant Power in a Shifting Market

The current market dynamics have undeniably shifted power towards tenants, a phenomenon not seen in decades. Matt Danison, CEO of Rentals.ca, highlights this significant change, observing, “In many markets, rents have dropped to the point where tenants can lease an apartment with an additional bedroom for the same rent as they were paying last year.” This unprecedented opportunity allows renters to secure more space or better amenities without increasing their housing budget, fundamentally altering their decision-making process.

Echoing this sentiment, Ben Myers, president of Bullpen Research & Consulting, explains the underlying factors. “For the first time in decades, tenants have a lot of negotiating power, as listings increased significantly in 2020,” Myers states. The dramatic surge in available rental units has created a highly competitive environment among landlords, who are now more inclined to offer incentives or negotiate terms. Furthermore, the widespread adoption of remote work has liberated many tenants from the constraints of daily commutes, prompting them to seek “cheap accommodations or more space” outside traditional urban cores. This pursuit of affordability and roomier living arrangements has become a defining characteristic of the post-pandemic rental landscape, reshaping demand patterns across the country.

Insights from Canada’s Leading Housing Experts

To provide a comprehensive and authoritative outlook on the 2021 rental market, Rentals.ca meticulously gathered perspectives from a wide array of industry leaders and data analysts. This extensive research involved interviewing economists and analysts from reputable organizations such as the Canada Mortgage and Housing Corp. (CMHC), known for its national housing market insights. Contributions also came from Local Logic, which specializes in urban intelligence and location insights; the Real Estate Investment Network (REIN), offering investor perspectives; Rentsync, a provider of multi-family marketing software and services; and Urban Analytics, focused on new home market intelligence. This collaborative approach, integrating the expertise of housing data analysts, seasoned investors, and rental market specialists, ensures a robust and well-rounded assessment of the complex factors influencing Canada’s rental housing sector.

Key Predictions for Canada’s 2021 Rental Market

Based on the consensus among these leading experts, several crucial trends are expected to shape the Canadian rental market throughout 2021:

Remote Work Will Persist Beyond the Pandemic: The shift to working from home, initially a necessity, is now widely accepted as a long-term fixture for many companies and employees. This ongoing trend will continue to influence where people choose to live, reducing the emphasis on proximity to downtown offices and potentially driving demand in suburban and smaller urban centres. The flexibility offered by remote work allows tenants to prioritize lifestyle amenities, space, and affordability over a short commute, fundamentally altering traditional rental patterns.
Supply Outpacing Demand in the First Half of the Year: The oversupply of rental units, particularly in major urban centres, is expected to continue through the first six months of 2021. This imbalance is a direct consequence of reduced immigration, fewer international students, and a general exodus from densely populated areas during the pandemic. Landlords will likely face challenges in filling vacancies, maintaining competitive pricing, and attracting tenants amidst ample choices.
Asking Rents to Fall Before a Summer Turnaround: Specifically in larger metropolitan areas, asking rents are forecast to experience further declines in the initial months of the year. However, experts anticipate a reversal of this trend, with rents potentially beginning to rise again before the summer. This turnaround is largely predicated on the successful rollout of vaccines, the eventual reopening of borders, and a gradual return to pre-pandemic economic activity and population growth.
Incentives Will Remain a Key Attraction: To entice prospective tenants in a tenant-favourable market, landlords are expected to continue offering a range of incentives. These might include reduced monthly rent for the first few months, free months of rent, coverage of moving costs, or complimentary amenities like internet or parking. Such incentives will be crucial for landlords looking to minimize vacancy periods and maintain occupancy rates in a competitive environment.
Vacancy Rates: A Tale of Two Markets: The rental market will likely see a bifurcation in vacancy rates. More expensive, luxury units will continue to experience higher vacancy rates as tenants prioritize affordability and value. Conversely, the lower end of the market is expected to remain tight, with strong demand for affordable housing options. This highlights the persistent challenge of housing affordability across Canada, even amidst overall market softness.
Smaller Cities Adjacent to Major Metros Will Thrive: The trend of tenants seeking more space and affordability outside of bustling city centres will continue to benefit smaller cities situated near major metropolitan areas. This is particularly evident in regions surrounding Toronto, where secondary and tertiary markets offer a compelling alternative for those seeking a balance between urban access and suburban tranquility. This geographic shift is a direct consequence of remote work and changing lifestyle priorities.
Virtual Tours and Digital Transactions as the New Standard: The pandemic accelerated the adoption of virtual technologies in the rental process, making virtual tours, online applications, and digital lease agreements commonplace. Experts widely believe these digital tools will remain a standard part of the renting experience, offering convenience and efficiency for both landlords and tenants. This technological evolution streamlines the rental journey and broadens the reach of available properties.
Market Recovery Hinges on Vaccine Rollout and COVID-19 Containment: Ultimately, the broader economic recovery and, by extension, the health of the rental market, are intrinsically linked to the successful deployment of vaccines and the containment of the COVID-19 pandemic. The ability to control the virus will dictate the return of international students and immigrants, the revival of travel and tourism, and a decline in unemployment rates—all critical drivers of rental demand.

Optimistically, many experts hope that by Canada Day (which also coincides with Montreal’s Moving Day), the country’s borders will be open once more, allowing the return of immigrants and a boost to population growth. A full recovery of travel and tourism, combined with declining unemployment, would further stimulate the economy. Crucially, the expectation is that students will prepare to return to apartments for fall classes, providing a much-needed surge in demand, especially in university towns and urban centres that have seen significant student exodus.

Evolving Tenant Preferences: What Renters Value Now

The pandemic has profoundly reshaped what renters prioritize in their living environments, with new data revealing a significant shift in desired amenities and neighbourhood characteristics. Guy Tsror, a data scientist for Local Logic, notes compelling changes in Canadian renter preferences. “Proximity to grocery stores and parks shot up in Canada – 21 per cent and eight per cent, respectively,” Tsror reports. This surge indicates a desire for convenient access to essential services and green spaces, likely influenced by increased time spent at home and a heightened appreciation for local amenities.

Conversely, interest in nearby public transport experienced a sharp decline, plummeting by 24 percent in Q4 compared to Q1 of 2020. This stark shift underscores the decreased reliance on public transit for commuting due to remote work arrangements. Other areas showing increased interest include quietness and general park access, both seeing an eight to ten percent rise, reinforcing the desire for tranquil living environments and outdoor recreational opportunities. Interestingly, interest in daycare facilities decreased by 18 percent, a trend possibly attributable to more parents working from home and having children under their direct care.

Despite these emerging trends, the report highlights that schools continue to lead all other categories in terms of renters’ preferences. This is particularly true for renters, most likely families, who are actively seeking larger units to accommodate their needs. For those renting smaller, one-bedroom units, grocery stores and public transport remain more critical, suggesting a demographic split in priorities. These renters often value the convenience of quick access to daily necessities and efficient transportation for urban living, even if their commuting patterns have temporarily changed. Understanding these evolving preferences is crucial for developers and landlords aiming to meet the demands of Canada’s diverse tenant base.

The Great Migration: Where Canadians Want to Live

The geographic distribution of rental demand also underwent a significant transformation in 2020, as the COVID-19 pandemic took hold across the country. Jason Leonard, co-founder and president of Rentsync, a leading provider of multi-family marketing software and services, confirms that rental demand was strongest in Canada’s secondary and tertiary markets. This pattern suggests a shift away from high-cost, high-density urban centres towards more affordable and spacious alternatives in smaller communities.

Data from Rentsync vividly illustrates this trend, particularly within British Columbia, where three secondary cities experienced remarkable year-over-year growth in rental demand. Richmond led the pack with an impressive 45 percent increase, followed by Nanaimo with a 26 percent rise, and Victoria with a 14 percent increase. These cities, offering a blend of lifestyle, amenities, and relatively lower costs compared to Vancouver, became attractive destinations for many renters. In Ontario and Saskatchewan, tertiary markets also saw substantial growth. Sudbury, Ontario, recorded a 17 percent increase in rental demand, while Saskatoon saw an 11 percent rise, highlighting the broader appeal of these provincial hubs. Further illustrating this nationwide trend, other markets with strong rental demand in 2020 included St. John’s, NL, up 21 percent; Coquitlam, B.C., up nine percent; and Kingston, Ont., up five percent. These figures collectively underscore a clear preference for communities that offer a balance of affordability, space, and a high quality of life, a direct response to the changing priorities brought about by the pandemic and the normalization of remote work.

Deep Dive into Major Markets: The Toronto Experience

The Toronto rental market, often considered a bellwether for Canada’s urban rental landscape, received specific attention in the Rentals.ca report. Insights and perspectives were drawn from key experts, including Ben Myers of Bullpen Research & Consulting; Tony Irwin, president and CEO of the Federation of Rental-Housing Providers of Ontario (FRPO); and Dana Senagama, Senior Specialist at CMHC, Market Insights. Their combined expertise paints a nuanced picture of one of the country’s most significant and dynamic rental markets.

Speaking about the Toronto market, Ben Myers offers a detailed forecast: “My expectation is that average rental rates will continue to decline for the first four to five months of the year. But they will pick up in the second half of the year as vaccinations increase and COVID numbers decline.” This prediction suggests that Toronto tenants can anticipate continued negotiating power in the early part of the year, before an anticipated resurgence in demand driven by improving public health conditions and a return to economic normalcy. This recovery phase is crucial for landlords who have faced unprecedented challenges with vacancies and declining rents.

Despite the current tenant-favourable conditions, Tony Irwin provides a sobering long-term perspective. “While we might go back to the way things were at some point, we will still have a supply crisis,” Irwin cautions. His statement highlights the enduring challenge of housing supply shortages in the Greater Toronto Area, a problem that predates the pandemic and is expected to persist even after the market normalizes. This underlying structural issue means that while short-term market fluctuations occur, the fundamental demand for more housing will remain, potentially leading to upward pressure on rents in the long run.

Further elaborating on the recent past, Dana Senagama confirms the severe impact of the pandemic. “The economic fallout of the pandemic has impacted the GTA rental market, causing vacancy rates to reach record highs in 2020,” Senagama states. This record-high vacancy underscores the immediate shock to the market caused by reduced immigration, a temporary exodus of students, and a shift in demand away from dense urban centres. The interplay of these short-term pandemic effects with the long-term supply crisis creates a complex environment for both renters and housing providers in Toronto, making expert analysis indispensable for navigating the evolving landscape.