Canada’s vacancy rate reaches new low as demand outpaces supply

In most major markets across Canada, strong rental demand outpaced supply for the second year in a row, resulting in less available purpose-built rental apartments and lower affordability in Canada’s primary rental market, according to the latest Rental Market Report (RMR) released by Canada Mortgage and Housing Corporation (CMHC).

As a result, the national vacancy rate for Canada’s primary rental market reached a new low of 1.5% in 2023, the lowest recorded rate since 1988, when CMHC began recording a national vacancy rate.

Average rent growth for 2-bedroom purpose built rental units surveyed in both 2022 and 2023, referred to as “same-sample” rent growth, reached 8% in 2023, well above historical averages. Also, in 2023 and similar to 2022, the change in average rents in 2-bedroom “turnover” units far exceeded the change in rents in non-turnover units. A unit is counted as a “turnover” if it was occupied by a new tenant who moved in during the 12-month survey period. (see table below).

Although most Canadian cities saw increased rental supply, it was not enough to keep pace with increased demand pressures, caused mainly by high population and employment growth. Higher mortgage rates and persistently high home prices also continued to make it harder and less attractive for renters to transition to homeownership. As rental demand pushed up, the construction of new rental homes continued to be difficult for homebuilders facing higher costs for financing and construction materials, along with labour shortages.

The secondary rental market, or rented condominium market, also tightened in 2023. The average vacancy rate for rented condominiums in the 17 census metropolitan areas (CMAs) surveyed by CMHC fell to 0.9% in 2023, down from 1.6% in 2022.

Along with a national overview the following CMAs have a dedicated section in the RMR:

You can download the entire Rental Market Report from the CMHC website.

Quote:

“Again in 2023, strong rental demand continued to outpace supply in communities across the country, making it very difficult for renters to find housing they can afford,” said Kevin Hughes, CMHC’s Deputy Chief Economist. “The vacancy rates and rent increases we are observing are further evidence the current level of rental supply in Canada is vastly insufficient and the need to increase this supply is urgent”.

*The following letter codes are used to indicate the reliability of the estimates: (a) — Excellent, (b) — Very good, (c) — Good, (d) — Poor (Use with Caution)

+ Kitchener – Cambridge – Waterloo

~ Data withheld due to unreliability

Report highlights:

• The national vacancy rate for purpose-built rental apartments in the primary rental market is at 1.5%. This is the lowest level since CMHC began recording a national vacancy rate in 1988.
• Average national rent growth for a 2-bedroom purpose-built apartment accelerated sharply to 8.0% from 5.6% over the previous 12-month period. This new high is well above the 1990 – 2022 average of 2.8% and outpaced both inflation (4.7%) and wage growth (5%).
• Calgary tied Toronto in 2023 for the second-lowest vacancy rate out of the six largest Canadian cities markets, as Calgary was particularly affected by high levels of interprovincial migration, in addition to significant international migration.
• Montréal’s vacancy rate dropped to a low not seen since before the pandemic, while Calgary and Edmonton both have their lowest vacancy rates in a decade.
• In 2023, vacancy rates held steady in Vancouver and Ottawa, but these markets remain very tight. In fact, Vancouver remains Canada’s tightest major rental market with the highest monthly average rents.
• Among the largest markets, Calgary and Edmonton saw the sharpest rise in rents. Toronto, Montréal, and Vancouver also saw rents rise significantly.
• The average vacancy rate in the secondary rental market, or rented condominium market, across the 17 CMAs surveyed by CMHC fell from 1.6% in 2022 to 0.9% in 2023.

Related links:

• Housing starts down 7% in 2023 from 2022
• CMHC 2023: Housing Reports Retrospective
• Interest rate hikes impact rental housing construction and supply
• Expanding Housing Supply: Rental Construction Financing Initiative
• Housing Starts in Canada's Major Cities: A Mid-2023 Overview
• Achieving Housing Affordability by the Next Decade

For information on this release:

CMHC Media Relations
media@cmhc-schl.gc.ca

Follow us on Twitter, YouTube, LinkedIn, Facebook and Instagram.

Backgrounder:

CMHC believes that better, more informed housing decisions are made with the availability of quality housing market data and insights. CMHC’s reporting on the rental markets has been mainstay of the sector for over 50 years. The data and analysis gathered provides a common language for businesses, governments, and the general public to discuss rental market issues and developments.

CMHC conducts the annual Rental Market Survey in October. The survey is conducted through property managers, landlords, and owners across all centres with a population of at least 10,000.  It targets only privately initiated structures with at least three rental units, which have been on the market for at least three months.

CMHC conducts the annual Condo Apartment Survey in September and October through telephone interviews. Its goal is to estimate the relative strengths in the secondary rental market, rented condominiums. Information is obtained from condo board representatives, property management companies or their representatives. This is supplemented by site visits if contact is not made by telephone.