The data, which analyzed monthly listings from the Rentals.ca network, showed year-over-year rent inflation for June was 7.5 percent, below the double-digit growth seen for most of 2022 and early 2023.
Rents also rose 1.4 percent from May, marking the fastest month-over-month increase for units listed on the website so far this year.
“What the country is experiencing right now is a perfect storm of conditions,” said Shaun Hildebrand, president of Urbanation, a real estate research firm.
“It’s interesting that rents continue to grow this fast despite rental apartment completions in Canada currently running at multi-decade highs. It really shows that the housing industry isn’t producing enough rental supply to satisfy this record level of rental demand.”
Hildebrand said demand is being driven by Canada’s rapid population growth, much of which is coming from non-permanent residents such as foreign students who rent, along with near record-low unemployment, rising incomes and “the worst home ownership affordability in over a generation for first-time buyers.”
High interest rates are a “key ingredient” to the lack of housing affordability, said Hildebrand. He predicted the Bank of Canada’s latest rate hike earlier this week would worsen existing barriers to entry for renters looking to buy a home.
“It‘ll reduce supply by keeping renters in their units for longer, it’ll convert more would-be first-time buyers into longer term renters,” he said.
“Just as meaningfully, it'll slow down the supply pipeline of new apartment projects because higher interest rates, obviously, raise the costs of developing.”
Toronto ranked third at $2,572 for a one-bedroom and $3,301 for a two-bedroom.
RBC economist Rachel Battaglia said those regions, along with Halifax, continue to see vacancy rates in the rental market hover around one percent or lower—well below the three percent rate that experts consider a sign of a balanced market.
She said Canada’s annual rate of population growth during the second quarter reached its fastest pace since the 1950s.
“We do have a population growing at a pretty astonishing pace,” said Battaglia, noting international immigrants tend to rent for the first five to seven years of living in Canada, adding pressures to the rental market.
“Although there have been some healthy additions to the rental unit stock, it just hasn’t kept pace with demand.”
On a monthly basis, rent growth was strongest in June for the smallest and least expensive unit types, with studios and one-bedrooms seeing price listings rise 2.6 and two percent during the month, respectively.
Each of Canada’s six largest cities experienced double-digit annual rent inflation in June for purpose-built and condominium apartments.
“The areas of the country that are experiencing the fastest rates of population increases are the areas that are experiencing the fastest rent increases. I don’t think there’s any coincidence there,” said Hildebrand.
“Areas like Calgary, Toronto and more specifically, markets like Scarborough and Brampton which tend to attract a high percentage of new immigrants, are seeing rent increases that are at really the top of the list.”