In recent months, Toronto's rental market has experienced a notable decline in prices, offering potential relief to renters after a prolonged period of escalating costs. Several factors have contributed to this downward trend, including increased rental supply, shifting population dynamics, and evolving economic conditions.
Increased Rental Supply
The Toronto Regional Real Estate Board (TRREB) reported a significant uptick in rental transactions, with 11,058 reported in Q4 2024—a 13.6% increase from the same period in 2023. Simultaneously, the number of apartments listed for rent grew by 17.5% to 25,478. This surge in available units has provided renters with more options and greater negotiating power, leading to a 5% decrease in average one-bedroom rents and a 3.5% drop for two-bedroom units compared to Q4 2023.
Shifting Population Dynamics
Canada's population growth, a key driver of rental demand, is projected to slow in 2025 and 2026. This deceleration is largely due to federal decisions to reduce immigration targets, particularly affecting non-permanent residents. The anticipated decline in population growth is expected to further ease the pressure on Toronto's rental market, contributing to continued downward pressure on rents.
Economic Conditions and Policy Changes
The Bank of Canada's monetary policy adjustments have led to lower borrowing costs, enabling more renters to consider homeownership. This shift reduces rental demand, contributing to increased vacancy rates and downward pressure on rents. Additionally, government initiatives like the Affordable Housing and Groceries Act (Bill C-56), which removes the Goods and Services Tax (GST) on new residential rental developments, aim to stimulate the construction of rental units, potentially increasing supply and further influencing rental prices.
Market Outlook
While average rents have decreased, they remain high from a historical perspective. As borrowing costs continue to trend lower moving toward the spring of 2025, more renters may transition to homeownership, potentially leading to increased rental inventory and continued moderation of rental prices.
In summary, Toronto's rental market in 2025 is undergoing a period of adjustment, with declining rents offering potential opportunities for renters. This trend results from a combination of increased supply, changing population growth, and favorable economic conditions. Renters are encouraged to stay informed and consider their options in this evolving market landscape.