Beyond Supply and Demand: Why Toronto’s Rental Prices Are Dropping
Toronto rent prices averaged $2,482 a month in February, a 5.3 per cent decline from the same time last year and 11.7 per cent lower than two years prior, according to the latest Rentals.ca and Urbanation rent report.
Giacomo Ladas, associate director of communications with Rentals.ca, said he expects rents this year to continue to be lower than they were last year, even if there are small rent increases from one month to another.
“We’re in a very interesting year now where we have so much supply that is still entering the market,” he said, and analysts aren’t anticipating population growth.
While rental activity and prices tend to increase in the spring and peak in the summer, he noted that prices last summer didn’t increase annually or compared to the spring due to demand being at its lowest point in years and supply being at a decade-high.
“Until we stop seeing supply coming in and demand pick up, it’s going to be a renter’s market throughout 2026,” Ladas said.
Rents in some surrounding communities also decreased, with Oakville rents down 14.6 per cent year-over-year and Vaughan rents down 11 per cent, the report found. That’s in line with a national trend of prices declining in areas near big cities.
Hamilton prices, meanwhile, increased 10.1 per cent year over year.
Beyond supply and demand, smaller apartment sizes in what’s coming online are also leading to lower average rent prices, Ladas said, as newer units are more expensive to build and developers in central locations try to fit more apartments into their buildings.
“Rent per square feet actually remained flat from this year to last, but we are seeing, in the past two years, the average size of a rental unit has fallen by over 6 per cent,” he said, to about 826 square feet on average.
There are also many “shoebox condos,” completed years ago that didn’t sell and that developers are now putting up for rent as “a last resort,” Ladas said.
As a result, these units in particular are seeing more affordable prices and more “incentives” like a month or two of free rent for new leaseholders, Ladas said, plus “a condo lifestyle for the price of a rental.”
Realtor Justin Bailey, however, explained that these numbers don’t always translate to greater affordability for renters.
His experience has shown that units priced between $1,700 and $1,950 — studios, in particular — are too impractical and small to attract renters.
“The new inventory that’s available, it’s not enticing to people,” he said. “They don’t like it.”
Rent prices appearing to decline also doesn’t account for the fact that “almost all” new builds, unlike many older apartments, are charging tenants separately for hydro and water, Bailey said.
Additionally, while recently completed condo towers are likely to offer competitive rental prices — because there are so many options available within the building — these same buildings may be “half done” with construction still taking place and amenities possibly not available.
“New construction, the prices are going to be pretty low because you’re not getting the full experience,” he said.
And while new buildings may offer lower prices now, renters are weary about moving into a non-rent-controlled apartment.
“People are a bit more conscious of the fact that, if the market changes this time next year, then landlords are going to increase their rents with no discretion whatsoever,” Bailey said.
“So, I think rent-controlled units still come at a premium.”
This article was first reported by The Star
