Canada’s rental vacancy rate to hit highest level in a decade: RBC
Cooling rents mask future supply risks for investors, lenders and brokers
By Liezel Once, 02 Apr. 2026
Canada’s rental market appeared to be moving out of crisis mode in 2025, with purpose‑built vacancy rates edging toward territory traditionally seen as balanced. However, RBC Economics argued that the apparent relief for tenants concealed a shorter‑term correction rather than a lasting reset.
Canada Mortgage and Housing Corporation (CMHC)’s latest Rental Market Report showed the national vacancy rate for purpose‑built units rose to 3.1% in 2025. That’s up from 2.2% a year earlier and above the 10‑year average, as new supply met slowing population and income growth.
“Rents in Canada have been cooling for more than a year now, and we think this trend has longer to run,” RBC economist Rachel Battaglia said.
“Slowing population growth, improved ownership conditions and elevated inventory could push the rental vacancy rate over 3% this year – the threshold we believe marks a balanced market,” Battaglia said.
“This would be the third consecutive year of rising vacancy rates across Canada and the first time in a decade that the rate would exceed 3% for a two-bedroom apartment.”
Rents cool, but in‑place tenants stayed squeezed
“These conditions point to additional softening in rents,” Battaglia said.
“Asking rents dropped outright in 2025 and are projected to decline further in 2026. Other market dynamics, however, are likely to keep average rents paid by tenants from falling.”
“Yet, this hasn’t translated to much relief for most tenants,” Battaglia said.
“Average rent for a two-bedroom apartment still grew 5.1% in 2025 despite moderating from 8% in 2023 and 5.4% in 2024.”
She noted that landlords “continued raising rents on existing tenants” and that for the 12.8% of units that turned over, “rent went up 8.7% between the old and new tenants.”
“This explains why rent is still among the fastest growing component of the CPI basket, even as advertised rents for available units have declined,” the analysis said.
Regional divergence and construction pipeline
“Immigration policy has had a strong impact on Canada’s rental market,” Battaglia said.
Temporary resident inflows fell in 2025, weakening demand in traditional gateway markets such as Toronto and Vancouver, which also saw sizeable net outflows to smaller centres.
RBC expects those outflows to persist near term, “likely shrinking the population of Toronto and Vancouver in 2026” and further pressuring rents in those cities.
At the same time, “rental construction boomed in recent years, fuelled by quickly rising rents and government incentives,” the report said, with Toronto, Hamilton, St. Catharines, Thunder Bay and Ottawa singled out as examples.
CMHC data showed housing starts up 5.6% nationally in 2025, with purpose‑built rentals a key driver.
“A rent correction is underway, but is unlikely to last long‑term,” Battaglia said.
“The rental stock experienced a much‑needed expansion in recent years, but not to the point of excess. Rental vacancy rates remain tight in several markets despite the increase in new units – with few markets seeing vacancies significantly higher than 3%.”
Looking ahead, RBC projected that average rent growth would slow to 3.6% in 2026 as weaker temporary resident inflows and better ownership affordability cooled demand, while new supply strengthened tenants’ bargaining power.
It also expects population growth to reaccelerate by 2028 as immigration policy stabilises, “bolstering demand for rental housing” and stabilising rents across most markets.
www.mpamag.com/ca/mortgage-industry/industry-trends/canadas-rental-vacancy-rate-to-hit-highest-level-in-a-decade-rbc/570716
