The average rent for all Canadian properties listed on Rentals.ca in October was $1,782 per month, down 8.1% annually, but up 0.7% from September 2020.

1. National Overview

The chart below shows the average monthly asking rent for single-family housing, townhouses, rental apartments, condominium apartments, and basement apartments cumulatively from January to October of this year (top panel), with the annual change in rent shown in the bottom panel.

1 Overall D.pngComposition of Listings by Asking Rent

It is important to note that this report analyzes asking rents, which can hide some of the softness (or strength) of the market. When conditions are poor, landlords will often accept rents below their asking rate or offer incentives like one or two months of free rent. The opposite can occur in a strong market, where a tenant offers the landlords more than ask to outbid the competition.

Secondly, a unit could spend several months on the market as a landlord might be reluctant to lower the ask, especially for a rent-controlled unit where increasing rents in the future is limited if the tenant stays. This can skew the rent level up.

The chart below looks at the distribution of listings on Rentals.ca by $500 asking rent ranges. In October 2019, only 20% of the listings were for properties for rent from $1,500 to $2,000 per month, that share increased to 34% in October 2020.

The share of listings in the highest six rent ranges were lower in October 2020 versus October 2019, with the market shares for top five ranges lower than October 2018. This chart suggests that there isn’t a significant number of luxury listings sitting on the market, pulling the average rent level up.

2 Rent Ranges.pngAnnual Change in Rental Rates by Property Type

The chart below looks at the annual change in average rents by property type in October 2019 and October 2020. The results are polar opposites for single-family, townhouse and condominium apartment listings.

Single-family homes (single-detached and semi-detached) saw average rents rise by 11% annually in October 2019, but fall 13% annually in October 2020.

Townhouse rents surged in the fall of last year, rising 17% annually to $2,025 per month. However, townhouse rents have declined 6% year over year in October 2020 to $1,912 per month.

Condominium apartments have experienced the biggest drop this year, falling 17% annually to $2,084 per month. Growth in October 2019 was modest, rising 1% year over year to just under $2,500 per month.

Surprisingly, rental apartments have experienced growth in 2020 of 5%, following an 8% rise last year. Part of that rent inflation is likely attributable to a number of new completions pulling the average up.

3 Built Form.pngChange in Average Rents by Rounded Unit Size and Month

As mentioned earlier, the change in the composition of the sample of listings analyzed can have an influence on the average, and result in a conclusion that the market is correcting or improving when it hasn’t. The best comparables are as “apples-to-apples” as possible, but have a robust sample of listings.

The following chart tries to control for the product type, location and unit size by looking at the average rent, and annual change in average rent in Ontario and Alberta, for suites from 450 square feet to 1,149 square feet (rounded to the nearest hundredth) for the April to October period in 2019 versus the same (pandemic-impacted) period in 2020.

4 Prov Rental Apts.pngAverage rents are down for all seven of the select rounded unit sizes in Alberta, with units from 500 square feet to 700 square feet down by 7% to 10% annually, and the 1,000-square-foot and 1,100-square-foot units down by 5% to 3% year over year, respectively. For this size range, units are down 8% year over year

In Ontario, the average rent is down in five of the seven rounded unit sizes, but combined, rents are down 2% annually. The biggest decline occurred for 600-square-foot units, which dropped 5% annually from $1,871 per month on average to $1,782 per month.

Average Rental Rates by Bedroom Type

The chart below looks at the average rent and average rent per square foot by bedroom type for studio to five-bedroom units in Canada in October 2020 (shown in red), the previous 24 months of data is shown in blue. This data includes all property types.

The data shows that, on average, a tenant will have to pay $325 more in rent to go from a studio or bachelor unit to a one-bedroom unit. For a tenant looking to upgrade from a one-bedroom to a two-bedroom unit, they’ll be looking at spending about $300 more on average in Canada.

After that, a third bedroom will cost a tenant $270 more, but a fourth bedroom will cost $515 more, likely because the majority of three bedroom units are only available via single-family and townhouse properties. So in addition to an extra bedroom, they’re likely gaining some outdoor property and additional parking (also more convenient parking closer to their unit). Adding a fifth bedroom will cost a tenant another $425 per month.

5 Bedroom Types.pngThis chart also shows the inverse relationship between the number of bedrooms and rent per square foot. On average, each additional square foot is worth less to a tenant than the previous, as there is diminishing marginal return on the extra space.

2. Municipal Rental Rates

Change in Average Rent for Select Municipalities and Former Municipalities

The chart below presents data on the average rent for all property types in select municipalities in Canada (Toronto is broken up into its former municipalities, prior to amalgamation). Data covers October 2020 and October 2019.

In October of last year, Oakville, Vancouver, North York, Toronto and Mississauga saw rent levels increase by 5% to 14% annually for all property types. In October 2020, all of those areas experienced declines of 5% to 17%.

The data appears to back up the “Urban Exodus” theory in Ontario, with average rents declining by 8% in North York, 15% in Etobicoke, 17% in Toronto and 20% in East York, while cities such as Kitchener, Hamilton and London are still seeing double-digit rent growth during the pandemic, with annual increases of 14%, 15% and 17% respectively.

6 Muni 1.pngIt cost more than $200 more to lease the average property in Toronto than North York in October 2019. This October, rent in North York is higher than Toronto by approximately $25 per month on average.

Average Rent by Bedroom Type for Condo & Rental Apartments by Area

Comparing North York and Toronto over the two periods is difficult because the make-up of listings has shifted dramatically. Both areas have seen declines in listings for the more expensive single-family product, but North York has seen a decline in condo listings year over year, while listings for condo apartments on Rentals.ca in Toronto has increased by 45% annually.

Controlling for product type and bedroom count allows for a better comparison of these two areas, as well as a comparison to other municipalities in Canada.

Rents for condominium and rental apartments in Vancouver have declined year over year with one-bedroom suites down 3% and two-bedroom suites down 6%.

North York has the most expensive one-bedroom units at $1,953 per month, topping both Toronto and Vancouver, as a number of new purpose-built apartments are starting pre-leasing programs, pulling the average up. Toronto rents have continued to nosedive, with one-bedroom units down 17% in October 2020 compared to a year earlier and two-bedroom units down 14% annually.

7 Muni 2.pngThe less expensive markets are even getting cheaper, with rent declines in Regina and Saskatoon year over year.

3. Change in Online Pageviews by Area in Ontario

Landlords in smaller municipalities in Ontario have reported increased interest in their properties due to the COVID-19 pandemic, as the work-from-home phenomenon has enticed some tenants to move farther afield, or return to their hometown of birth or where they attended university.

The chart below looks at the municipalities and former municipalities in Ontario that have seen the biggest growth in online pageviews in October 2020 versus October 2019.

The biggest increase occurred in Kingston, followed by Guelph, Windsor, Barrie and Cambridge. Rounding out the top ten are Whitby, Brantford, Hamilton, Burlington and Woodstock.

8 Muni ON.pngHowever, part of this rise in pageviews in Kingston is simply due to an increase in listings. The areas with the highest pageviews per listing include: Barrie, Cambridge, Milton, Oshawa, Nepean, Ottawa, Guelph, Burlington, Kitchener and Windsor.

4. Tenant Lifestyle Findings

Local Logic tracks a number of lifestyle preferences among prospective tenants over a number of real estate portals in Canada. Those preferences can be tracked over time.

The chart below shows the most popular lifestyle searches for tenants in the Vancouver, Toronto and Montreal Census Metropolitan Areas (CMAs).

In all three areas, access to groceries was a top priority for tenants, followed by proximity to transit. In Toronto, elementary schools were very important, more so than in Vancouver or Montreal.

Local Logic Lifestyle 1D.pngIn the Montreal CMA, pedestrian-friendly is more important than car friendly, while the opposite is true in the Toronto CMA, but the shares are very close.

How have these preferences changed from earlier this year before tenants knew how the work-from-home phenomenon was going to be a longer-term reality?

The chart below shows greater interest in being close to grocery stores, a desire to be in a quiet neighbourhood — which makes sense when you’re trying to work — and being in proximity to parks, which is much needed when many activities are shut down due to COVID-19.

On the flip side, with fewer people commuting to work, the desire for car-friendly and transit friendly locations have subsided slightly in October 2020 compared to March 2020.

Local Logic Lifestyle 2D.pngThe only change in October over March that was somewhat puzzling, is the increased desire of tenants in the Toronto and Montreal CMAs to be close to nightlife. Many bars and clubs are closed or have reduced hours, but perhaps these tenants are thinking long-term.

5. Conclusion

The average rent for all property types increased month over month in Canada in October after four months of being flat. The pre-leasing of new purpose-built rental apartments, and the rise in listings for new and expensive condo apartments have contributed to the rise.

As several of Canada’s major cities see declining rental rates, other secondary markets are seeing rents increase. Demand is clearly down and supply up overall, but demand is shifting geographically.

With the recent announcement that a COVID-19 vaccine could be available next year, and a commitment from the federal government to significantly boost immigration, consumer confidence and rental demand could start to increase, but not likely until the new year. The pandemic’s second wave continues to wreak havoc on the service industry, and job losses are impacting renters more than owners. So the rental market is clearly not safe in the short-term. Expect additional supply via completions and evictions, as landlord and tenant boards wade through the backlog, and government financial assistance programs are discontinued.

Real Estate Investment Trusts, developers and institutional owners still believe there will be a return to downtowns and the work-from-home phenomenon will lose its luster. However, the data shows that the urban exodus is real — online pageviews and rental rates are increasing in many secondary markets, and tenants’ desire to be in car-friendly or transit-friendly central apartments has declined slightly.

And, if you want to lease your unit, make sure you mention how close you are to a grocery store!

Rentals.ca Data

The data used in this analysis is based on monthly listings from Rentals.ca. The data is much different than the more familiar numbers collected and published by Canada Mortgage Housing Corporation (CMHC).

Rentals.ca data includes basement apartments, rental apartments, condominium apartments, townhouses, semi-detached houses and single-detached houses, where CMHC’s primary rental data only includes rental apartments and rental townhouses. CMHC collects some data on the secondary market, but it is reported separately.

The CMHC rental rates are based on the entire universe of purpose-built rental units in Canada (the stock), while Rentals.ca data is primarily based on the asking rents of vacated units only (the flow) — this is a smaller sample size, but more representative of the actual market rent a prospective tenant encounters. The Rentals.ca data set typically produces much higher rental rates in comparison to CMHC, as vacated units are not subject to rent control.

The average and median rental rates via Rentals.ca can also skew higher than CMHC’s data for several reasons: The inclusion of larger and more expensive unit types like singles, row units and condos; the survivorship bias (overpriced units remain in the sample longer); and the multiple listings of the same property at different rent levels every month.

It should also be noted that properties listed for above $5,000 a month and below $500 a month are eliminated from the sample of units analyzed. Also, short-term leases, single-room rentals, and furnished rental units are eliminated from the sample where identifiable.