The wait is over! View the February 2024 Rentsync National Rental Demand Report.
Embracing the last months of 2023, Canada’s rental market continues to evolve and show signs of change, reflecting expected seasonality as rental demand continues to drive downwards.
However, the trajectory of this decline is less dramatic than last years. Likely due to a combination of strong maintained rental demand, and limited availability of supply. We see that month-over-month declines are more muted than in previous years, while relative year-over-year demand scores are up. Suggesting that irrespective of the total number of prospective renters still in the market, the relative demand for rental units is higher than last year leading to further tightening of market conditions and supply.
This less pronounced decline underscores the resilience of the rental market, and a steady influx of new renters constantly entering the market will lessen the constraints of seasonality and promote above-average leasing activity in the final months of the year.
Unfortunately, the potential benefits of stronger rental demand during what would otherwise be the slowest period of the annual leasing cycle are mitigated to some extent by the growing cost of living and high rental rates. Pushing some renters out of the market and forcing many to remain in place thus reducing the overall number of prospective renters. This is especially prevalent in the larger more expensive rental markets which are seeing the greatest monthly declines, while smaller secondary and tertiary markets which are traditionally more affordable experience lower relative month-over-month declines.
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.
Demand scores trended downward nationally with no region immune to seasonality. Across our top 40 markets; prospects declined by -12.5%, Active properties were relatively flat at -1.3% month-over-month and, average prospects per property declined by -11.4%. These declines are in line if not less exaggerated than the previous month suggesting that we will not likely see more inflated demand fluctuations through the remainder of this year and leading into the 2024 leasing cycle. The top 10 markets saw a less exaggerated decline of -8% in demand scores, underscoring the strong fundamentals these communities have through strong employment prospects, more moderate cost of living, and typical access to larger metro areas. Declining demand is unlikely to further accelerate instead we are likely to continue seeing continued rates of decline in the coming months.
Month-over-month (M/M) National demand scores are down -11.4% in November 2023 compared with October 2023. November shows a rate of continued decline similar to that of October.
Relative to last year; this year sees greater variability in annual demand trends and lower monthly declines. Primary and tertiary markets show the greatest growth in overall demand scores, thanks in part to an imbalance between the decline of unique prospects and available properties.
Year-over-year (Y/Y): National demand scores are up +34.6% in November 2023 compared with November 2022. Annual comparisons are not directly correlated as they are calculated using different demand score divisors and therefore may not adequately represent shifts in market conditions or changes in rental demand.
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 down -14.1% month-over-month, unique prospects are down -14.7%, and properties are down -0.7%.
Demand scores show the true impacts being felt by primary markets which is a quite significant month-over-month decline in overall renter demand with a majority of this decline attributed to the direct decline of active prospects. Primary markets saw the highest monthly decline in unique prospects of all market segments, and in conjunction with relatively flat property availability showed the greatest monthly decline in average prospects per property. Unfortunately even with declining prospect counts the tight market conditions seen across the country have limited the impacts of slowed demand on average rents. With rents staying relatively flat declining -0.5% monthly. Average market rents are likely to remain flat if not drop marginally for the foreseeable future as renter demand continues to drop.
Renters in urban centres will continue to feel the pain as availabilities dry up and the market slows into the final months of the year. Prospect counts will decline, but rent relief is unlikely.
*Year-over-year demand scores are up +40.4%, prospects are down -16.2%, and properties are down -13.9%.
Annual demand comparisons for primary markets show that average prospects per property are down -2.7% year-over-year. Whether due to resilience, or the continued growth of renter populations in these communities; primary markets show strong staying power, and in the face of drawn-out market tightening they maintain a strong grasp on many prospective renters across the country
*Secondary markets demand scores are down -3.1% month-over-month, unique prospects are down -10.4%, and property counts are down -7.5%.
Secondary markets saw the most muted monthly demand score shifts likely due to the decline in available properties which resulted in average prospects per property going down by a more muted -3.1%. Secondary markets maintain the highest demand scores of all market segments with a total average score of 3.2 compared with the average of the top 40 markets at 2.6.
We expect secondary markets to show greater staying power and maintain below-average declines in prospect counts in the near term.
*Overall, year-over-year demand scores are up +3.8% year-over-year, with prospects down by -33.1%, and properties down by -6.9%.
Secondary markets have maintained strong demand scores throughout the past year and have maintained the highest average demand scores of all market segments which resulted in a lower year-over-year demand score shift. Although demand remains high, secondary markets saw the largest relative decrease in unique prospects of all market segments. This is likely a combination of many renters having left secondary markets in favour of larger primary markets, as well as the gradually declining rate of turnover with many tenants choosing to remain in place to stave off the significant rent increases associated with a new lease.
*Demand scores in tertiary markets declined by -6.0% month-over-month, unique prospects are down -4.8%, and available properties are up +1.2%.
Tertiary markets saw a more moderate decline this month compared to last; with unique prospects declining -20.7% in October, and only -4.8% in November. Tertiary markets with smaller populations and more limited rental supply can show more fluctuations in demand as market conditions change, and limited movement in either prospect or property counts can have more exaggerated impacts on the broader rental markets.
The ranking of tertiary markets saw the greatest change in almost a year with two new markets added (Burnaby, and East York) with the remaining markets as a result getting pushed down and reshuffled.
*Overall, year-over-year demand scores are up by +30.8%, unique prospects are down by -9.6%, and available properties are down -0.2%.
Annual comparisons see growth in demand scores for the sixth consecutive month in a row which shows that post-recovery tertiary markets have not only maintained strong fundamentals but also strong demand. Tertiary markets show a more muted decline in prospect counts relative to larger markets, while available properties are flat year-over-year.
Tertiary markets are likely in a better position this year than last year given their stronger staying power, and limited year-over-year changes in unique renters, and available properties. Tertiary markets are likely to continue showing more muted change year over year moving into 2024.
Approaching 2024 we see Canada’s rental market show both expected seasonality, and more unique shifts which buck the trend and defy conventional expectations. The downward trend of rental demand which is typical of the colder months is less pronounced than last year might suggest. This more moderate decline is a consequence of strong sustained rental demand over the year which resulted in historically low vacancy rates and a systemic undersupply of available units.
Canada’s rental market shows resilience with a steady influx of new renters. Offsetting the losses of seasonality we see that monthly declines are more muted than in previous months, and certainly more muted than was experienced this time last year. Unfortunately, the potential benefits of this heightened demand are tempered by the escalating cost of living and growing market rents. Which puts additional downward pressure on rental demand and drives people out of the rental market. This trend is most obvious in larger more affluent markets which currently see the more pronounced declines in rental demand, while smaller secondary and tertiary markets which are traditionally more affordable, exhibit lower relative monthly declines.
Nationally rental demand continues to trend downwards reflective of expected seasonal demand. However while not felt equally across all market segments; the top 10 markets which are typically more immune to short-term declines, instead show an average decline of approximately -8% relative to the broader national average of -11.4%. Although not immune to seasonality these communities nonetheless have a greater attraction on prospective renters which has driven them up our rankings to take up the top spots in our rankings.
While demand will continue to decline in the coming months, we don't expect it to further accelerate, suggesting instead a more muted decline leading into 2024. The unique combination of factors, including maintained rental demand, limited supply, and weakened affordability, will continue to shape the rental landscape. As markets continue to change the focus on securing high-quality tenants and qualified leads is more important than ever to ensure your properties are well-positioned to navigate the changing landscape.
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 6.9 this month, versus 7.6 last month. North York experienced a -0.7 point decrease 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 down -10% in November 2023 versus October 2023, while maintaining its position within our rankings as the highest-achieving market since October. The year-over-year demand score in North York increased by 2.2 points representing a 47% increase from November 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 3 position from last year.
*This report provides month-over-month rental listing data for November 2023 versus October 2023 and a year-over-year comparison from November 2023 versus November 2022. It also outlines the month-over-month and year-over-year trends in primary, secondary, and tertiary markets.
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