# Why Declining Rental Prices Make Canadian Multifamily Even More Attractive By [The StagTower Beam](https://beam.stagtower.com) · 2025-12-18 invest, investor, canada, canadian, apartment, building, multitenant, multi-tenant, multi-family, multifamily, commercial, real, estate, rent, revenue --- If you've been following Canadian real estate news, you've likely seen the headlines: "Rents Drop for Fifth Consecutive Month" or "Canadian Rental Prices Hit 18-Month Low." For potential investors, this might seem like a red flag. But here's what those headlines miss: the rental market correction is creating one of the most compelling entry opportunities for multifamily investment in years. Let me show you the data that sophisticated investors are watching—and why declining asking rents don't tell the whole story. **The Headlines vs. The Reality** --------------------------------- It's true that Canadian rental prices have declined. National average asking rents fell 4.8% year-over-year in February 2025, bringing the average to $2,088—the lowest level since July 2023.\[^1\] After years of rapid rent growth (up 8.6% in December 2023 and 12.1% in December 2022), this represents the first annual decrease since the COVID-19 pandemic.\[^2\] But here's the critical distinction most coverage overlooks: **not all rental properties are created equal.** **The Purpose-Built Advantage: A Tale of Two Markets** ------------------------------------------------------ When you dig into the data, a remarkable pattern emerges. While condominiums and houses saw significant rent declines—5.2% and 7.4% respectively—purpose-built rental apartments experienced barely perceptible declines of just 0.3% to 1.7%.\[^3\]\[^4\] This isn't a small difference. It's the gap between struggling and thriving. **Why does this matter?** Purpose-built rental apartments are professionally managed buildings designed and operated specifically for long-term rental income. These are the properties that institutional investors and sophisticated platforms like StagTower focus on—not condos that individual owners rent out or secondary market housing. ### **The Numbers Tell the Story** Let's look at what actually happened in 2024: * **Purpose-built rental apartments:** Rents grew 5.4% to an average of $1,447 for a two-bedroom unit\[^5\] * **Condominium rentals:** Fell 5.2% to $2,219\[^3\] * **Houses and townhouses:** Dropped 7.4% to $2,181\[^3\] Even more telling: when purpose-built rental units turn over (when one tenant moves out and a new one moves in), rents increased by 23.5%—virtually unchanged from 2023 rates. These turnover rent increases accounted for more than 40% of the overall rent growth in purpose-built apartments during 2024.\[^5\] **Understanding Asking Rents vs. Occupied Unit Revenues** --------------------------------------------------------- Here's what often gets lost in rental market reporting: **asking rents** (what landlords advertise for vacant units) and **actual revenues** (what building owners collect from occupied units) can tell very different stories. While asking rents for new purpose-built units saw modest declines, occupied unit revenues remained remarkably stable. Existing tenants in rent-controlled provinces continue paying their current rents plus modest annual increases (typically 2-5% depending on provincial guidelines), while units that turn over see substantial increases to current market rates. For example, in Toronto's purpose-built rental market, rents for new units available in Q4 2024 reached an all-time high for that quarter, averaging $4.09 per square foot, with an average monthly rent of $2,967 for a 726-square-foot unit.\[^6\] This represents the premium that new tenants pay—and the revenue opportunity that exists when long-term rent-controlled tenants eventually move. **What's Actually Driving the Correction?** ------------------------------------------- Understanding why rents declined helps explain why this creates opportunity rather than concern. Three primary factors are at play: ### **1\. Record Supply Completions (Temporary)** Canada's supply of purpose-built rental apartments grew 4.1% year-over-year in 2024—the highest increase in more than 30 years.\[^7\] In the first half of 2025 alone, 3,156 new purpose-built rental units reached the occupancy stage, a 77% increase compared to the first half of 2024.\[^8\] This supply surge is temporary. Construction starts have already begun declining, with purpose-built rental construction starts dropping 10% in 2024.\[^9\] The wave of completions we're seeing now reflects projects started in 2021-2023 during the development boom. With fewer projects breaking ground today, this supply pressure will ease through 2026 until the federal government’s new programs actually lead to breaking ground on new buildings, which often takes several years depending on the municipality. ### **2\. Immigration Policy Adjustments (Stabilizing)** The net flow of non-permanent residents dropped to 319,506 in 2024—a 50% decrease from the 2023 total of 636,427.\[^10\] International student arrivals were down 43% in the first nine months of 2024 compared to 2023.\[^11\] However, it's crucial to understand what this means: immigration isn't stopping—it's normalizing. Canada still welcomed 395,000 permanent residents in 2025 and plans to maintain levels around 395,000 to 500,000 annually.\[^12\] The country remains one of the fastest-growing advanced economies, and immigration continues to account for nearly 98% of population growth.\[^13\] The recent news that the Canadian population decreased slightly in 2025 is not worrying. ### **3\. Economic Softening (Cyclical)** Labour market conditions have softened, with youth unemployment rising above five-year averages in most major markets.\[^14\] This cyclical economic slowdown has reduced immediate rental demand, particularly among younger renters entering the market. **Why This Creates Investment Opportunity** ------------------------------------------- Smart investors know that the best entry points often come during periods of temporary market softness. Here's why the current rental market correction makes Canadian multifamily more attractive, not less: ### **1\. Strong Underlying Fundamentals** Despite recent supply additions, Canada still faces a massive structural housing shortage. The country needs approximately 390,000 new housing units annually by 2030 to close the housing gap, but construction levels remain well below this target.\[^15\] Even with immigration reductions, Canada's projected housing gap in 2030 will still be 658,000 units.\[^16\] ### **2\. Proven Resilience of Purpose-Built Assets** The data clearly demonstrates that purpose-built rental apartments weather market cycles far better than other rental property types. While condos and secondary market rentals saw sharp declines, professionally managed apartment buildings maintained near-flat to positive growth. This resilience stems from several factors: * Professional property management and tenant retention strategies * Diversified tenant base across multiple units (not single-family exposure) * Long-term hold strategies that prioritize stable cash flow over short-term rent maximization * Quality construction and amenities that command premium rents ### **3\. Healthy Vacancy Rates** While vacancy rates have increased, context matters. The national vacancy rate for purpose-built rentals reached 2.2% in late 2024, up from a record low of 1.5% in 2023.\[^7\] This is still near historical averages (typically 2.5-3.5%) and represents a healthy, balanced market—not oversupply. Compare this to the early 1990s recession when vacancy rates exceeded 6-7% in major Canadian markets. Today's rates remain tight by historical standards. ### **4\. Market Bifurcation Creates Selection Opportunity** The current market isn't uniformly soft—it's bifurcated. Affordable, well-located units with rents under $2,000 per month remain in high demand with minimal vacancy. The softness is concentrated in newly completed luxury units priced at the high end of the market.\[^17\] This creates opportunity for investors to be selective, focusing on properties with strong fundamentals: good locations, reasonable rent levels, and proven tenant demand. ### **5\. Temporary Supply Surge Benefits Long-Term Holders** Current softness is primarily the result of record-high completions in 2024. However, this increased supply is expected to be temporary as new construction activity has slowed.\[^9\] Investors entering the market now benefit from: * Purchasing properties after the supply surge (reduced near-term competition) * Holding through the absorption period (2025-2026) * Positioning for renewed rent growth as supply constraints return (2027+) **Regional Variations: Where Opportunity Exists** ------------------------------------------------- Not all Canadian markets are experiencing the same dynamics. Understanding regional differences is crucial: ### **Toronto & Vancouver: Maximum Correction, Maximum Opportunity** These markets saw the steepest declines, with Toronto apartment rents down 7.6% annually to $2,615 and Vancouver down 5.2%.\[^18\] However, both markets also have: * Strongest long-term fundamentals (jobs, immigration destinations) * Highest historical rent growth over 10+ year periods * Most significant supply constraints going forward The correction in these markets represents the strongest entry opportunity for long-term investors. ### **Calgary & Edmonton: Sustained Demand** Alberta markets saw 2-3% rent increases even during the national correction, reflecting continued demand in comparatively affordable markets.\[^18\] Calgary's vacancy rate is forecast at just 1.1% in 2024 and 1.0% in 2025.\[^19\] ### **Montreal & Ottawa: Moderate Adjustments** These markets saw modest declines of 0.4% to 0.7%, demonstrating relative stability.\[^18\] **What Building Owners Are Actually Experiencing** -------------------------------------------------- Let's talk about the real-world impact on apartment building revenues and net operating income (NOI)—what ultimately matters for investors. ### **Revenue Stability** Building owners with stabilized properties (those past initial lease-up phase) are experiencing: * Steady cash flow from existing occupied units * Modest but positive rent growth on renewals (5.4% average) * Significant revenue increases on unit turnover (23.5% premium) * Low tenant turnover due to rent control dynamics (tenants staying longer to preserve below-market rents) This combination creates surprisingly stable revenue even during asking rent corrections. ### **Incentive Considerations** It's true that some new buildings are offering incentives (one or two months of free rent) to compete for tenants. When adjusted for these incentives, effective rents in some markets run approximately 12.4% below advertised "face rents."\[^8\] However, these incentives are: * Concentrated in newly completed luxury buildings * Temporary measures during initial lease-up * Already factored into investor underwriting for new developments * Less relevant for stabilized buildings with established tenant bases ### **Operating Expense Pressures** Operating expenses continue rising (insurance, maintenance, property taxes), which does create margin pressure. However, with revenues still growing at 5.4% for purpose-built apartments, NOI remains positive and healthy for well-managed properties. **The Sophisticated Investor Perspective** ------------------------------------------ Here's how experienced real estate investors view the current market: **Cyclical Correction + Structural Shortage = Opportunity** Real estate is cyclical. Periods of rapid growth (2021-2023) are naturally followed by periods of correction and normalization. What separates attractive markets from unattractive ones isn't whether they experience cycles—it's whether they have strong long-term fundamentals. Canada has those fundamentals: * Continued immigration driving population growth * Persistent housing undersupply (need 390K units/year, building ~245K) * Economic stability and rule of law * Strong rental demand from demographic trends (aging millennials forming households, newcomers starting as renters) The current correction is allowing investors to enter at better valuations while fundamentals remain intact. **Purpose-Built Resilience Matters** The fact that purpose-built rental apartments declined just 0.3% to 1.7% while condos fell 5-8% demonstrates the value of professional asset management and purpose-designed rental properties. This resilience protects investor capital during corrections and maximizes returns during growth periods. **Currency Diversification Opportunity** For international investors, the Canadian dollar has weakened against major currencies, providing additional entry value. European and global investors gain both real estate exposure and CAD currency diversification—a hedge against EUR volatility. **What This Means for Global Investors** ---------------------------------------- For StagTower's target audience—global retail investors seeking portfolio diversification—the current Canadian rental market presents several advantages: ### **Accessible Entry Points** Temporary market softness means property valuations have stabilized or declined slightly, creating better entry opportunities than during the 2022-2023 peak. Starting positions from €100 allow investors to gain exposure without the capital requirements of direct property ownership. ### **Stable Income During Correction** Even during this "correction," purpose-built rental apartments are generating stable bi-weekly income for investors. The 5.4% revenue growth may be slower than 2023's 8%, but it remains positive and substantial—especially compared to European deposit rates or bond yields. ### **Positioning for Recovery** Investors entering now position themselves ahead of the next growth cycle. As the temporary supply surge is absorbed through 2025-2026 and construction starts remain constrained, rental growth is expected to accelerate in 2027 and beyond. ### **Professional Management Protection** Purpose-built rental apartments benefit from professional property management that navigates market cycles, maintains occupancy, and optimizes revenues. This protection is particularly valuable for international investors who can't actively manage properties themselves. **Looking Ahead: The 2025-2027 Outlook** ---------------------------------------- Industry experts and housing agencies provide helpful context for what's ahead: Urbanation President Shaun Hildebrand notes that "any rent declines should be temporary and remain minimal mostly due to a long-term undersupply of rental units in the country, with rents set to accelerate in the coming years as the current slowdown in construction works to restrict supply."\[^2\] The Canada Mortgage and Housing Corporation (CMHC) emphasizes that despite the recent correction, "affordability for Canadian renters remains a challenge," and the "record growth in rental supply helped slow down average rent growth... underscoring the critical role of added supply in improving housing affordability."\[^5\] In other words: the correction is healthy for the market's long-term sustainability, but it doesn't eliminate the fundamental supply-demand imbalance. **The Investment Thesis Remains Compelling** -------------------------------------------- Let's return to the core question: Do declining rental prices make Canadian multifamily less attractive? The data suggests the opposite. **What we're seeing:** * Temporary supply surge being absorbed through 2025 * Asking rents correcting while occupied unit revenues remain stable * Purpose-built apartments vastly outperforming other rental property types * Structural housing shortage persisting despite recent completions * Construction starts declining, setting up renewed supply constraints **What this creates:** * Better entry valuations than 2022-2023 peak * Stable current income (5.4% revenue growth + 23.5% turnover premiums) * Strong positioning for next growth cycle * Opportunity to invest in resilient asset class (purpose-built) For European, African, South American and Asian investors seeking international diversification, stable income, and exposure to one of the world's safest real estate markets, the current correction represents opportunity, not risk. **The Bottom Line** ------------------- Headlines about declining rents are technically accurate but fundamentally incomplete. Yes, asking rents have fallen. But purpose-built rental apartments—the institutional-quality properties that serious investors focus on—have declined just 0.3% to 1.7% while maintaining 5.4% revenue growth on occupied units and 23.5% premiums on turnover. This is not a crisis. It's a market normalization after unprecedented growth, creating attractive entry points for long-term investors. The question isn't whether Canadian rental prices have declined. The question is whether you understand the difference between asking rents and building revenues, between condos and purpose-built apartments, between cyclical corrections and structural fundamentals. Sophisticated investors do. And they're paying attention. * * * _This content is for educational purposes only and does not constitute investment advice. All investments involve risk, including potential loss of principal. Past performance does not guarantee future results._ [_StagTower_](https://stagtower.com) _is regulated under Estonian VASP framework._ * * * **Sources** ----------- * \[^1\]: [Rentals.ca](http://Rentals.ca) and Urbanation. (February 2025). "[Canada's Rental Prices Drop: March 2025 Rent Report & Trends.](https://ontariohousingmarket.com/2025/03/18/canadas-rental-prices-drop-march-2025-rent-report-trends/)" * \[^2\]: [Rentals.ca](http://Rentals.ca) and Urbanation. (January 2025). "[Average Canadian Rent Falls 3% In 2024 In First Annual Decline In 4 Years](https://storeys.com/average-canadian-rent-17-month-low/)." * \[^3\]: [Rentals.ca](http://Rentals.ca) and Urbanation. (December 2024). "[Rent prices are dropping across Canada.](https://nowtoronto.com/real-estate/rent-prices-are-dropping-across-canada-in-toronto-theyre-down-by-nearly-10-per-cent/)" * \[^4\]: Global News. (February 2025). "[Canada's average asking rent has dropped again, hitting 18-month low.](https://globalnews.ca/news/11006777/canada-rental-prices-drop-january-2025/)" * \[^5\]: Canada Mortgage and Housing Corporation. (December 2024). "[Rental supply gains help cool pace of rent growth in 2024: CMHC.](https://www.investmentexecutive.com/news/research-and-markets/rental-supply-gains-help-cool-pace-of-rent-growth-in-2024-cmhc/)" * \[^6\]: Del Condominium Rentals. (February 2025). "[Toronto Condo Rental Market Update – February 2025.](https://delrentals.com/blog/toronto-condo-rental-market-update-february-2025/)" * \[^7\]: Canada Mortgage and Housing Corporation. (January 2025). "[Canada's supply of purpose-built rental apartments hits 30-year high.](https://ontarioconstructionnews.com/canadas-supply-of-purpose-built-rental-apartments-hits-30-year-high)" * \[^8\]: Urbanation. (2025). "[Two-Thirds of Rental Buildings Offering Incentives in Q2.](https://www.urbanation.ca/news/two-thirds-rental-buildings-offering-incentives-q2)" * \[^9\]: Del Condominium Rentals. (February 2025). "[Toronto Condo Rental Market Update – February 2025.](https://delrentals.com/blog/toronto-condo-rental-market-update-february-2025/)" * \[^10\]: [liv.rent](http://liv.rent). (February 2025). "[2025 Canada Rental Market Trend Report.](https://liv.rent/blog/rent-reports/2025-canada-rental-market-trend-report/)" * \[^11\]: Government of Canada. (November 2024). "[CIMM – Housing Shortages – November 25, 2024.](https://www.canada.ca/en/immigration-refugees-citizenship/corporate/transparency/committees/cimm-nov-25-2024/housing-shortages.html)" * \[^12\]: Government of Canada. (October 2024). "[2024 Annual Report to Parliament on Immigration.](https://www.canada.ca/en/immigration-refugees-citizenship/corporate/publications-manuals/annual-report-parliament-immigration-2024.html)" * \[^13\]: Government of Canada. (November 2024). "[CIMM – Housing Shortages – November 25, 2024.](https://www.canada.ca/en/immigration-refugees-citizenship/corporate/transparency/committees/cimm-nov-25-2024/housing-shortages.html)" * \[^14\]: Canada Mortgage and Housing Corporation. (2025). "[2025 Mid-Year Rental Market Update.](https://www.cmhc-schl.gc.ca/observer/2025/2025-mid-year-rental-market-update)" * \[^15\]: TD Economics. (2024). "[Canada's Housing Supply.](https://stories.td.com/ca/en/article/canada-housing-supply)" * \[^16\]: Parliamentary Budget Office. (2024). "[Impact of the 2025-2027 Immigration Levels Plan on Canada's Housing Gap.](https://www.pbo-dpb.ca/en/additional-analyses--analyses-complementaires/BLOG-2425-006--impact-2025-2027-immigration-levels-plan-canada-housing-gap--repercussions-plan-niveaux-immigration-2025-2027-ecart-offre-logement-canada)" * \[^17\]: CBRE. (2025). "[Multifamily - Canada Real Estate Market Outlook 2025.](https://www.cbre.ca/insights/books/canada-real-estate-market-outlook-2025/multifamily)" * \[^18\]: Global News. (February 2025). "[Canada's average asking rent has dropped again, hitting 18-month low.](https://globalnews.ca/news/11006777/canada-rental-prices-drop-january-2025/)" * \[^19\]: Canada Mortgage and Housing Corporation. (2024). "[Slow 2024 for housing starts will mean ongoing high prices: CMHC.](https://renxhomes.ca/cmhc-expects-slow-2024-for-housing-economy-due-to-interest-rates)" --- *Originally published on [The StagTower Beam](https://beam.stagtower.com/why-declining-rental-prices-make-canadian-multifamily-even-more-attractive)*