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

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.