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Economic Viewpoint

Beyond Homeownership: The Outlook for Rent Inflation in Canada’s Largest Cities

November 14, 2024
Maëlle Boulais-Préseault, Economist • Kari Norman, Economist • Randall Bartlett, Senior Director of Canadian Economics

Buying a home has become increasingly out of reach for many Canadians. As would-be first-time homeowners are priced out of the market, more people are reliant on rental housing. As such, rent inflation has become an essential metric for understanding the state of overall shelter affordability.

Rents have been rising quickly in Canada, with rented accommodation CPI inflation averaging 8.3% in Q3 2024—the fastest pace since the early 1980s. It was also much higher than the pace of owned accommodation price growth, which decelerated to 5.5% in the same quarter as borrowing costs continued to come down.

Our outlook is for a slowdown in the pace of rent inflation over the next few years, in line with a rising unemployment rate and weaker population growth. Provinces that have welcomed a large number of non-permanent residents (NPRs) over the past two years, such as British Columbia and Ontario, are expected to see their rent inflation rise less rapidly than elsewhere. Alberta and Saskatchewan should see rents slow the fastest given the highly cyclical nature of the economy and rental market in those provinces. In contrast, still-elevated rent inflation is expected in Quebec, as the 2024 rent control guideline is higher there than it is in Ontario.

Uncertainty regarding the implementation of announced immigration policies is an important consideration in our rent inflation forecast. If the population slows faster than anticipated, demand for rental accommodation will cool and price pressures will ease. Conversely, higher-than-anticipated population growth, more in line with the Bank of Canada’s most recent outlook, will put more sustained pressure on rent CPI.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.