January 18, 2026
Canada’s housing slowdown is now clearly spilling into the rental market. New data from Rentals.ca shows average asking rents fell again in December, marking the steepest annual decline in four years and pushing national rents to their lowest level since mid-2023.
However, the pullback is far from uniform. Nearly all of the decline is coming from Canada’s most expensive cities, while traditionally more affordable markets continue to see rent growth. The result is a rapid narrowing of the gap between high-cost and low-cost rental markets across the country.
National Rents Fall to Lowest Level Since Mid-2023
The national average asking rent declined 0.7% month-over-month in December, falling by $14 to $2,060, according to Rentals.ca. This marked the fourth consecutive monthly decline, leaving rents 2.3% lower year-over-year, or roughly $48 below December 2024 levels.
While the drop may feel modest, it represents the largest annual decline since 2021. That said, it follows a period of extreme rent inflation, with average rents rising more than 30% between April 2021 and May 2024.
Cooling Demand Is Playing a Bigger Role Than Supply Alone
The decline in rents is not being driven by new supply alone. Demand-side factors are also easing pressure.
On the supply side, rental completions tied to the low-interest-rate investment boom are beginning to hit the market. At the same time, recent immigration caps have reduced the pace of demand growth, particularly in major urban centres.
Together, these forces are pushing vacancy rates higher and limiting landlords’ ability to raise rents, especially in investor-heavy markets.
Rent Relief Is Concentrated in Canada’s Most Expensive Cities
The national decline is almost entirely driven by high-priced markets.
Annual rent declines were steepest in:
- Vancouver: -7.9%
- Toronto: -5.1%
- Calgary: -5.0%
These cities had seen some of the fastest rent growth during the post-pandemic surge and are now experiencing the sharpest pullbacks as affordability constraints hit demand.
Affordable Cities Continue to See Rent Growth
In contrast, lower-cost markets are still seeing rents move higher.
Over the past three years, the strongest rent growth has occurred in:
- Edmonton: +17.4%
- Montreal: +7.5%
This divergence suggests demand at the higher end of the rental market may be saturated, while affordability-driven demand continues to support rents in lower-cost cities – at least for now.
The Rental Price Gap Is Shrinking Rapidly
One of the most notable trends is how quickly the rent gap between cities is closing.
Three years ago, Vancouver’s average asking rent was roughly 138% higher than Edmonton’s, a difference of about $1,800 per month. By December 2025, that spread had narrowed to 74.8%, or approximately $1,136. In just three years, the gap shrank by more than 60 percentage points.
This convergence reflects a broader pattern seen previously in home prices, where rising costs in major hubs pushed renters to chase relative affordability rather than absolute value.
A Familiar Pattern From Housing Cycles
The Bank of Canada previously flagged a similar dynamic during the housing boom, where buyers migrated to cheaper markets not because of fundamentals like job growth or amenities, but because prices looked low relative to Toronto or Vancouver.
That same pattern now appears to be playing out in the rental market. Cities that led home price growth in earlier cycles are also leading rent growth today.
What This Signals for Canada’s Rental Market
For renters, falling rents in major cities may offer some short-term relief. For investors, the picture is more complicated.
If demand in a market is driven primarily by its discount to a more expensive city, that appeal can disappear quickly when the premium corrects. As the affordability gap narrows, relative value fades, potentially weakening demand in markets that recently saw strong rent growth.
The rental market is no longer moving in lockstep. Instead, Canada appears to be entering a phase of regional divergence, where pricing power depends increasingly on local fundamentals rather than spillover demand from overheated cities.
References
Rentals.ca. (2026). National rent report: December 2025. https://rentals.ca
Better Dwelling. (2026, January 13). Canadian rental prices just posted their sharpest drop in four years. https://betterdwelling.com
Canada Housing Market 
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