The wait is over! View the November 2023 Rentsync National Rental Demand Report.
Summer leasing has come and gone; in its place remains growing demand in the face of declining prospect counts. Rental demand which by August typically begins to decline has shown no signs of slowing due to the imbalance of supply and demand declining at different rates.
With the weather beginning to cool, a growing number of prospective renters are choosing to remain in place and end their rental search. The overall trend shows a decline in prospect counts. Alongside this decline in available prospects, available properties have all but stabilized with an overall decline of only -0.3% monthly.
With more people choosing to stay in place and prospect counts in decline, some may expect to see improvements in rental availability however, strong overall market fundamentals, and a lack of available supply, coupled with the lowest vacancy rates in 20 years suggest that we are unlikely to see softening in a constrained market any time soon.
Secondary and tertiary markets continue to show the strongest gains with unique prospects up +2.2%, and 5% respectively showing staying power and a greater willingness by renters in these communities to continue their rental searches. These communities offer a lower cost of living, with many maintaining access to major employment centers and amenities thus maintaining a draw on those looking to raise a growing family.
In the following sections, we identify notable changes in rental demand, highlight market-specific trends, and discuss what the coming months may look like for the rental demand in Canada.
Having passed the annual peak in leasing activity and active renters on the market, we continue to see growth in relative rental demand as both prospects and available properties continue to decline. Tertiary markets saw the greatest growth in demand scores with prospect counts up +5% monthly, while the top 10 markets saw more varied results with prospects down -1.9%, and properties up +1.5% resulting in limited changes in overall scores from the previous month. Notably, North York took over the top spot from Etobicoke, Halifax went up 5 spots achieving the 4th highest demand score this month, and lastly, Red Deer went up 5 spots to rank 10.
Month-over-month (M/M) National demand scores are up +3.8% in August 2023 compared with July 2023. Slowing the growth trajectory of the previous 3 months as we move into the fall.
Last year saw unconventional leasing trends which has resulted in year-over-year comparisons proving less meaningful to gauge rental demand. The past year saw a large decline in renter activity -16.1%, along with a decrease in available properties -9.7%.
Coupled with changing market dynamics and lower average prospects per property, overall demand scores are stable at +2% from last year. Primary and secondary markets saw the largest declines in unique prospects -14%, and -28% respectively, while recent growth in prospect counts in tertiary markets has resulted in only 0.5% change from last year.
Year-over-year (Y/Y): National demand scores are up +2.0% in August 2023 compared with August 2022. Prospects declined at approximately twice the rate of property availability.
To provide a more detailed analysis of the rental demand in specific markets across Canada, we have segmented our market data into 3 key market segments.
Examining these market segments individually offers a deeper understanding of demand patterns within larger population centers, and allows us to identify trends across markets.
*Overall demand scores are up +3.0% month-over-month, unique prospects are down -4.7%, and properties are down -1.6%.
Primary markets saw the greatest monthly decline in unique prospects however tight supply and lack of new product entering the market have resulted in strong maintained demand scores. The percentage of renters within our top 40 rankings found in primary markets has also declined to 70.5% down -2.7% from the previous month. Suggesting we may be seeing a gradual shift in rental interest within Canadian markets.
Primary markets saw a softening in demand albeit mild with a greater decline in prospects than properties, and coupled with the greater number of prospects entering smaller markets this may suggest that in the coming months, primary markets will show further weakening in demand trends. Although the much hoped for relief to renters may not come from this softening, it will however reduce rent growth in the coming months.
*Year-over-year demand scores are up +11.0%, prospects are down -14.6%, and properties are down -15.5%.
We see maintained annual growth over the previous 3 months in demand scores for primary markets. This is the result of annual prospect counts declining for the 7th month in a row, only to be outdone by the decline in available properties. This means that although there are fewer renters today, those renters are competing for a dwindling market of available properties.
Primary markets have long since stabilized and show signs of even tighter availability with low vacancy rates, and strong renter demand. Regardless, the draw of strong amenitization and proximate employment continues to attract residents to primary markets ensuring continued demand and long-term viability for large urban centers.
*Secondary markets demand scores are up +1.2% month-over-month, unique prospects are up +2.2%, and property counts are up +7.5%.
Secondary markets saw the highest increase in property availability in August and for the first time in recent memory a decline in average prospects per property. Typically average prospects per property are directly linked to demand scores; however having used the same threshold for demand score calculations for 12 months, we have now readjusted the scoring criteria and this has resulted in demand scores becoming unlinked from their inputs.
This in no way suggests that these markets have experienced a decline in demand given their historically low vacancy rates, strong rent growth, and structurally undersupplied rental availability. Even if we have since passed peak leasing activity, strong maintained demand will continue to affect these communities.
*Overall, year-over-year demand scores are down -32.5% year-over-year, with prospects down by -28.2%, and properties up +16.8%.
Continuing from last month we see an increase in available properties. This uptick in new properties is likely related to new properties brought to market, along with properties that have undergone renovations made available once more. Although overall demand scores and their counterpart average prospects per property are both down year over year this does not suggest that overall rental demand has declined, and instead simply indicates the changes in market conditions over the previous year.
Secondary markets maintain the highest average prospects per property (31.2) in Canada, and while down annually, they remain 28% higher than primary markets (24.4), which achieve the second-highest average prospects per property. Secondary markets maintain strong interest by many renters who see them as more approachable, with less competition, and offering a lower cost of living.
*Demand scores in tertiary markets increased by +10.4% month-over-month, unique prospects are up +5%, and available properties are up +1.3%.
Tertiary markets saw the greatest monthly increase in prospect counts and subsequently the greatest increase in average prospects per property at +3.7%.
This reaffirms that the momentum in Tertiary markets shows no sign of slowing down. As long as these markets maintain their competitive advantage in terms of affordability, and reduced competition; we can expect them to continue to attract renters seeking value for their money. With this, the ongoing trends in tertiary markets are likely to continue into the foreseeable future.
*Overall, year-over-year demand scores are down by -17.8%, unique prospects are down by -19.2%, and available properties are up +1.4%.
We see for the third month in a row signs indicating that tertiary markets have all but recovered from their post-pandemic woes. With demand scores up 10.1% annually, and average prospects per property relatively stable. We are unlikely to see significant shifts in tertiary market demand outside of that posed by seasonality which would typically begin to show in August.
Considering the lack of available rental supply in many Canadian markets, Tertiary markets are well-positioned to continue attracting prospective renters from larger more competitive markets. These markets remain attractive options, especially for those working remotely, or looking for a smaller more affordable community to call home. Tertiary markets are adapting in response to changing demand, making them more resilient in the face of broader market conditions.
The rental landscape continues to change for the better and with strong maintained demand we see little to no slowdown in rental demand fundamentals. The typical seasonal trend would see a decline in rental demand in August, followed by a continued contraction throughout the end of the year. This year has continued to prove the exception with demand remaining robust in the face of seasonality.
The continued imbalance between the demand posed by prospective renters and the available supply of rental properties has kept demand elevated and will continue to do so. Even with the growing number of renters opting to stay in their current homes rather than continuing their rental search, we see demand scores climb. Through a combination of tighter market conditions (low vacancy rates) and an influx of new households entering the rental market, we expect these overall trends to persist.
With more renters choosing to stay in place effectively removing those units from circulation for longer, home ownership becoming less attainable for a greater number of people who would have otherwise bought a home, and a growing population; Canada is poised to see continued tightening in the rental market.
Looking ahead we anticipate that the coming months will bring about moderate changes to rental demand, and although the market is typically expected to cool during the off-peak winter months. The overall lack of available supply will likely limit any contraction. Property owners and managers should remain proactive in preparing their properties for a shifting rental landscape. As it becomes more important than ever to fill vacancies with quality leads, maintaining a high-quality online presence and addressing vacancies promptly will be key to ensuring continued success.
To present this data, Rentsync has determined three key calculations for each area of the report, They are as follows:
Demand Score: Our demand score is rated out of 10 (with 10 being the highest score a city can receive), and is calculated based on unique leads per property, per city, and compared against benchmark data.
For Example North York, ON received a demand score of 7.4 this month, versus 7.0 last month. North York experienced a 0.4-point increase in its demand score.
Demand Percentage (% +/-): This is determined according to the year-over-year (YOY) or month-over-month (MOM) increase or decrease in unique leads per property.
For Example The month-over-month demand scores in North York, ON went up +5% in August 2023 versus July 2023, while gaining 1 position within our rankings as the highest-achieving market in August. The year-over-year demand score in North York decreased by -1.0 points representing a -12% decrease from August 2022.
Position: The position is determined by unique leads per property, with cities that have at least *20 properties or more. The position will vary depending on demand.
For Example This month, North York, ON achieved the top spot on our Top Canadian Cities in Demand rankings and is up 2 positions from last year.
*This report provides month-over-month rental listing data for August 2023 versus July 2023, as well as a year-over-year comparison from August 2023 versus August 2022. It also outlines the month-over-month and year-over-year trends in primary, secondary, and tertiary markets.
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