Canada’s Rents Fallen 22 Months, but Why Is Toronto Starting to Bounce Back?
Canada’s Rents Have Fallen for 22 Straight Months, but Why Is Toronto Starting to Bounce Back?
**By Laifu | August 8, 2026 | Source: Rentals.ca / Urbanation August 2026 Rent Report**
Canada’s asking rents have now fallen for 22 consecutive months.
But just when many assumed rents would keep sliding, a significant shift has emerged: national average asking rents have risen month-over-month for four consecutive months, with Toronto’s July figure jumping 1.6% in a single month. Three-bedroom rents even rose 3.9% year-over-year.
The question has fundamentally changed: is Canada’s rental market still falling, or has it begun finding its bottom?
More importantly, this rent adjustment has not hit all property types equally. The small apartment units that investors have favored for over a decade are now seeing the deepest declines, while family-sized units are proving increasingly resilient.
National Overview: 22 Months of Year-Over-Year Declines, But Four Months of Monthly Gains
On August 6, Rentals.ca and Urbanation released their August 2026 National Rent Report, covering July 2026 data.
The national average asking rent for all residential properties fell to $2,037 in July, down 4% year-over-year. This marks the 22nd consecutive month of annual declines, with cumulative drop reaching 7.5% over the past two years — the lowest July asking rent since 2022.
On the surface, Canada’s rental market appears to be cooling further. But focusing only on year-over-year figures may cause you to miss an important signal.
Since March this year, national average asking rents have risen month-over-month for four consecutive months. July saw a 0.2% increase from June, and the year-over-year decline has been narrowing — this is the smallest annual drop since February 2026.
In other words, rents have not officially reversed course. But the pace of decline has slowed considerably. Urbanation president Shaun Hildebrand described this as typical seasonal momentum heading into the back-to-school period, with Canada’s rental market “stabilizing, but not yet recovering.”
There is one data point worth cautioning against misinterpretation: the 4% national average decline does not mean the same units普遍 (universally) became 4% cheaper. The mix of listings has also shrunk.
In Canada’s six largest cities, the average asking rent per square foot in July was $2.54 — virtually unchanged from a year ago. But the average rental unit size has shrunk to 831 square feet, down 3% year-over-year and 5.5% compared to two years ago.
So part of the average rent decline comes from structural change in the listing pool: there are simply more small units on the market. Total rent appears cheaper, but per-square-foot pricing has not fallen much. This is why looking at national averages requires careful interpretation.
The Unit-Type Split: Studios Down 9.6%, Three-Bedrooms Up in Toronto
Now comes the most important part of this report: different unit types have completely diverged.
The national average rent gap between purpose-built apartments and condominium apartments has narrowed to just $22. In other words, the rent premium tenants are willing to pay for condo apartments over purpose-built has become very limited. But the costs landlords bear — mortgage financing, maintenance fees, property taxes — far exceed $22.
For over a decade, the prevailing investment logic was to make units as small as possible. Studios had lower total prices, one-bedrooms were easier to rent, and per-square-foot rents were higher. So developers produced these products in massive volumes.
But the market is now repricing them. In July, national condo studio rents plummeted 9.6% year-over-year, and one-bedroom condos fell 7.8%.
Conversely, three-bedroom units tell a different story. Among all rental unit types nationally, three-bedrooms declined just 2.1%, making them the most resilient category.
Toronto showed an even more striking divergence: average asking rent for three-bedroom units reached $3,655 in July, up 3.9% year-over-year.
This is significant because the rental market is signaling that a property’s residential value may be regaining importance. Young singles can share a one-bedroom or live in a studio. But when a family has two children, needs a home office, or wants long-term stability, two- and three-bedrooms cannot easily be substituted.
This is the core problem facing small apartments: they were once an excellent financial product, but they may not be the best family housing. And as investment demand weakens, what ultimately determines rent is how many people actually want to live there — not how easy it was to finance.
Toronto: First to Fall, Possibly First to Bottom Out
Toronto is the most noteworthy city in this report.
In July, the average asking rent for apartments and purpose-built rentals in Toronto reached approximately $2,577. Month-over-month, rents rose about 1.5%, and the year-over-year decline has narrowed to less than 1%. Among Canada’s six largest markets, Toronto is now performing the strongest.
Additionally, active rental listings are down approximately 6% compared to last year — a signal that something is changing.
Over the past two years, a massive wave of new condos completed delivery. Many investors took possession and immediately listed their units for rent. Supply surged, and rents naturally came under pressure. That delivery peak is now gradually passing.
Urbanation released additional data worth considering: in Q2 2026, the Greater Toronto Area and Hamilton region signed 18,923 condo leases, setting a new quarterly record — up 5% year-over-year.
But by the end of Q2, only 5,366 active rental condos remained on the market — down 13% from a year ago. Months of inventory had fallen to just 0.9 months.
This explains why Toronto rents are suddenly stabilizing: it is not that population has surged again, but rather that after two years of price declines, some pent-up rental demand has returned. At the same time, new condo supply entering the rental market is beginning to shrink. Both supply and demand are shifting simultaneously.
Toronto may be one of Canada’s largest cities to first approach a rental bottom.
However, caution is warranted. Competition among newly built rental apartments remains fierce. Urbanation found that in Q2 2026, 64% of new rental projects in the GTA were still offering incentives. The most common was one month free, sometimes two. When these incentives are factored in, the average actual incentive value reached $377 per month.
This is why landlords say rents are stabilizing while tenants still find discounts — both things can be true at the once.
An equally important point is geographic divergence within the GTA: Brampton, Mississauga, Oakville, and Oshawa still saw year-over-year declines exceeding 7%, while Toronto itself is beginning to decouple. Rentals.ca has directly attributed this trend to “fewer new condos entering the rental market + pent-up demand being released.”
Vancouver: Deepest Decline, Vacancy Above Balanced Range
In July, Vancouver rents fell 1.4% month-over-year and dropped 4.5% year-over-year, tying with Calgary for the largest decline among the six major cities.
CMHC data also shows that Vancouver’s 2025 rental apartment vacancy rate has risen to 3.7%. CMHC’s estimated balanced range is approximately 2% to 3%. This means Vancouver’s current vacancy rate sits above the estimated balanced range.
A large volume of rental completions over recent years, combined with significantly slowed population growth, is expanding tenant choices.
Calgary:消化期 After Rapid Supply Growth
July rents rose 0.5% month-over-month but remain down 4.5% year-over-year.
Calgary and Vancouver appear to have the same annual decline, but the underlying drivers differ. Calgary has been building rental housing at a very rapid pace — 2025出租住宅 construction even set records. CMHC data shows the local rental apartment vacancy rate reached 5%, which is relatively loose among Canada’s major cities.
Calgary is now in the digestion period following rapid supply growth.
Montreal: Relatively Stable, but Peripheral Markets Diverging
In July, Montreal rents fell 0.4% month-over-month and declined 1.6% year-over-year — a smaller decline than Vancouver or Calgary.
But peripheral market pressures are more pronounced. For example, Longueuil saw rents fall 10.9% year-over-year. This number deserves attention because the Greater Montreal detached home market has seen relatively resilient prices.
An interesting phenomenon emerges: home prices can still rise while rents fall. For investors, these two metrics cannot be conflated. If purchase prices continue climbing but rents do not keep pace, the rent-to-price ratio deteriorates. Add in property taxes, insurance, and financing costs, and cash flow pressure may actually worsen.
Why Have Rents Fallen for 22 Months? Two Forces Reshaping the Market
Force #1: Population Growth Has Plunged
Statistics Canada’s latest estimate shows that in Q1 2026, Canada’s population decreased by 55,025 — an exceptionally rare change.
More critically, the non-permanent resident (NPR) category fell by 117,879 in a single quarter, a 4.4% decline. Meanwhile, permanent immigrant arrivals in Q1 were down 20.2% compared to the same period last year.
This data remains preliminary and will be updated in September 2026. But the direction is clear: Canada’s population growth trajectory has fundamentally changed from the previous years.
And who feels population changes first? Typically not the detached home market. The rental market is affected first. International students, temporary workers, and new immigrants most commonly enter the rental market first, and they most often rent studios and one-bedrooms.
This is why small-unit rents are falling faster — it is not entirely coincidental. Demographic shifts are reshaping demand structures.
Force #2: New Supply Delivery Is Colliding With the Demand Brake
CMHC’s June 2026 analysis shows that many Canadian cities are seeing new rental units complete en masse. In 2025, over 80% of new starts in Montreal were rental housing. Calgary, Edmonton, and Ottawa all saw record出租住宅 construction. Toronto was near historic highs as well.
These projects were not decided upon this year — they were investment decisions made by developers during the previous rent boom. Now they are completing en masse, colliding with slowing population growth.
The result: demand hits the brakes while supply continues pouring in. Rents naturally come under pressure.
But there is a second reversal lurking here: today’s rent decline does not mean rental supply will remain abundant three years from now. Developers have already started braking.
Toronto’s data is particularly revealing. In Q2 2026, the Greater Toronto Area still had 31,645 purpose-built rental units under construction. That sounds like a lot, but condo apartments under construction simultaneously dropped to 38,252 — down 39% year-over-year and 64% compared to the 2023 peak.
The problem is that roughly half of all newly built condos historically ended up in the rental market. Canada effectively operated two rental supply systems: a purpose-built rental system, and a condo-investment-rental system.
Now the second system is rapidly contracting. Purpose-built supply is increasing, but it may not fully offset the gap.
This creates the central paradox of Canada’s rental market today: 2026’s problem is too much supply. By 2028 or 2029, the problem may flip to too little supply. Today’s falling rents reduce developer returns on rental construction. Unsold condos delay condo-apartment starts. If population growth resumes in a few years, the projects cancelled today cannot be rebuilt overnight.
So this round of rent declines may be planting the seeds for the next round of supply shortages.
One More Issue: The Cheapest Rents Remain Tightest
Another point particularly relevant to renters: the national average decline does not mean housing has suddenly become cheaper across the board.
CMHC’s 2026 research found that the truly lowest-rent units remain very tight in most cities. The segment that has seen the most improvement is actually newer, higher-priced rental buildings — where landlords are competing aggressively with incentives including free parking, one month free rent, and even direct cash rebates.
But the genuinely sub-$1,000/month units? Choices remain limited.
So today’s market presents a peculiar situation: renters with capacity to afford new apartments have gained bargaining power, while lowest-budget renters may not have felt much improvement at all. This is why seeing “average rents down 4%” does not mean Canada’s housing crisis has ended.
Actionable Advice for Three Groups
If You Are a Renter
Conditions are better than two years ago, particularly in Toronto, Vancouver, and Calgary.
Do not just look at asking prices — ask about free rent periods, parking incentives, or moving subsidies. But if you already live in a unit priced well below market, do not move just because news reports say rents are falling. Low-priced units remain the tightest segment.
If You Are a Landlord
The mindset that needs to change most is the old assumption that you should always raise rents — especially for studios and one-bedrooms.
One month of vacancy costs more than keeping a few dollars below what you think the market will bear. A $2,500 unit losing 6% in rent saves about $1,800 per year. But if you price too high and lose a month of tenancy, that loss already exceeds $2,083 — not including re-leasing costs.
Right now, occupancy rate matters more than a pretty asking price.
If You Are Considering Buying an Investment Property
These data points matter more than ever. Stop asking simply “will this city’s prices go up?” and start asking three questions:
- Who is the tenant for this unit type?
- How much supply is coming online in the next three years?
- How is the local demographic profile changing?
Studios, two-bedrooms, and three-bedrooms are no longer the same market. Toronto, Montreal, Vancouver, and Calgary are each in different cycles.
Summary: Rents Have Not Reversed, but Canada’s Rental Market Is Repricing Itself
Canada’s rents have not officially reversed. National year-over-year figures still show a 4% decline. Vancouver and Calgary face continued downward pressure. Montreal is relatively stable, but peripheral markets are diverging.
Toronto has shown the first clear signs of bottoming out — monthly rents are rising, and the year-over-year decline has narrowed sharply. The bigger shift is that Canada’s rental market is repricing housing: the units most attractive to investors are not necessarily what today’s tenants want, while family-sized units that were once dismissed as too expensive show stronger rent resilience.
And today’s apparent supply abundance does not guarantee the same three years from now. That is what makes this rent report genuinely worth paying attention to.
*Data sources: Rentals.ca / Urbanation August 2026 National Rent Report (July 2026 data), CMHC 2026 Mid-Year Rental Market Update, Statistics Canada population estimates, Ontario government demographic report.*
*Note: Toronto rent data contains an internal discrepancy in the Rentals.ca report — the executive summary states +1.5% month-over-month / -0.8% year-over-year, while the Toronto city section reports +1.6% / -0.6%. This article uses conservative phrasing to avoid amplifying either figure.*