Canada’s GDP declines in fourth quarter of 2025
By Tony Irwin, President and CEO, RHC
Canada’s real gross domestic product (GDP) contracted unexpectedly at an annualized rate of 0.6% in the fourth quarter of 2025, the slowest annual growth rate since 2020. The overall growth rate for 2025 was 1.7%, which is in line with Bank of Canada expectations. According to Statistics Canada data, the main reason for this contraction was that manufacturers dipped more heavily into their inventories rather than producing new goods. Exports (particularly to the U.S.) also declined during this period. Looking ahead, the Bank of Canada projects Canada’s real GDP to grow by just 1.1% in 2026, which would make it one of the weakest years in recent decades outside of a recession.
Will interest rates rise or fall?
In the short term, it appears the Bank of Canada will hold the policy interest rate at 2.25%. There are no expectations to change the interest rate in the short term. Modest increases of 0.25% per year are expected starting in 2025, although this may change should there be significant shifts in inflation or other factors.
On March 3, the Standing Committee on Finance launched its pre-budget consultations in advance of the 2026 budget. Written submissions can be submitted to the committee until Thursday, April 30, 2026, at 11:59 p.m. (ET). RHC will consult with the membership to ensure our submission accurately reflects current concerns and recommendations that will support the rental housing industry.
How will this affect the housing market?
The GDP slowdown feeds directly into housing demand and construction in several ways:
• The CMHC expects buyer demand to remain below historical averages, due to higher price-to-income ratios, high carrying costs, and job uncertainty preventing homebuyers from entering the market.
• The national average home price fell to $652,941 in January 2026, down 2.6% year-over-year; the national benchmark fell for the eighth consecutive month. Home sales were down 12.5% compared to the previous year. Annual benchmark price declines fell the most in Ontario (-7.0%) and British Columbia (-4.9%), while Atlantic Canada, Quebec, and Saskatchewan experienced gains.
NATIONAL OUTLOOK
• New home construction is expected to fall through 2028 due to high construction costs, lower demand, and more unsold homes. Condominium construction will continue to remain weak. Residential structure investment fell by an annualized 4.4% in Q4 2025, and is expected to carry into 2026.
• In Toronto, there is a large and growing inventory of completed condo units. Many buyers who bought these units pre-construction are now having difficulty selling, even at a loss, due to interest rates being higher when they bought and condo values declining.
• National home sales are projected to pick up in 2026, particularly in Ontario and British Columbia. However, the main reason is that these provinces had some of the weakest sales in decades, and demand is finally releasing.
What does this mean for the rental housing market?
A lot of things are happening in the rental housing market, and the falling GDP will have an additional impact.
Canada’s national purpose-built rental vacancy rate rose to 3.1% in 2025, a significant increase from 2.2% in 2024. Immigration also declined 18% year over year, which led to reduced population growth and fewer international students. Combined with high construction completions, rental housing supply increased, leading to lower demand.
However, purpose-built rental construction is expected to slow in the second half of 2026, as developers react to higher vacancy rates and slower rent growth. There are projects in the pipeline, which will contribute to housing starts in 2026, but a continuous slowdown in project proposals is expected to extend into 2028. This slowdown could create a supply shortfall within the next two to three years, which means the current supply will not be enough to meet future demand.
According to Rentals.ca, average asking rents in Canada have fallen 2.0% year over year, the lowest level in 31 months. Average asking rents have also declined for 16 consecutive months, although the decline has slowed over the last three months. Lower rents mean less cash flow for investor-owned rental properties, which could reduce investor demand in the overall housing market. Some rental property owners are offering more incentives to attract and retain tenants, which has also reduced income in the short term.
Conclusion
Canada’s GDP weakness at the end of 2025, and extending into 2026, is dragging down the housing market by suppressing buyer confidence, cooling construction activity, and softening the rental housing market. Renters will have more choice and more negotiating power, while purpose-built rental developers and investors will face more economic challenges. If the Canadian economy continues to face challenges, driven by the U.S. trade war, the CMHC warns that Canada could face a mild recession driven by severe reductions in investment.
Bank of Canada publishes report on how mortgage rates affect housing prices and rents
On February 18, the Bank of Canada published a staff analytical paper entitled “Channels of Transmission: How Mortgage Rates Affect House Prices and Rents in Canada” by economists Nishaad Rao and Tao Wang. The paper investigates how monetary policy affects both house prices and rental prices in Canada, examining the transmission channels through which changes in mortgage interest rates flow into these two housing markets. According to the paper, these two markets must be studied at the same time and the impacts of monetary policy are highly specific to local conditions. The study analyzes national data from 1997 to 2023 and city-level data for 24 Canadian cities from 2005 to 2023.
MARCH 2026
Basic premise
Mortgage rates are tied to the Bank of Canada’s key interest rates: when the interest rate rises (or falls), mortgage rates follow. Higher mortgage rates make it more costly to borrow money, which means fewer people can afford to purchase a home. As a result, demand for homes decreases, which leads to declining housing prices.
Some experts expect rents to fall as well, as there are still fewer people with money to spend. However, according to the research, rents do the opposite: they go up. According to the paper, there are three forces (or channels) pulling in different directions that affect rents.
The three channels
The paper uses a standard investment model wherein an investor would be indifferent to investing money (in a stock, fund, etc.) and purchasing rental property. There are three distinct channels through which higher mortgage rates affect rents:
• User cost channel: Many landlords own rental properties with mortgages. Higher interest rates increase their borrowing costs. Because their operating costs increase with higher interest rates, landlords will pass those costs onto tenants by charging higher rents.
• Ownership choice channel: As mortgage rates rise, the number of renters who can afford to transition into homeownership will decrease (i.e., they cannot afford the higher monthly payments). Therefore, renters who would have purchased a home stay in the rental market. This increases both the relative demand for rental housing (as there is more competition for rental units) and increases rent levels due to greater demand for limited supply.
• Income channel: Higher interest rates slow down the overall economy. A tighter monetary policy can lead to overall job losses and lower household incomes. Because people have less to spend on housing, this puts downward pressure on housing demand, which pushes down both home prices and rents.
National impact
At the national level, research determined that the first two forces (i.e., landlords passing on higher costs and potential homebuyers staying put as renters) have a greater impact than the income effect. According to the data, a 1% (100-basis-point) increase in mortgage rates will cause house prices to decline by approximately 5% after one year and 10% after two years. Conversely, rents will increase by approximately 2–3% after one year and 5–6% after two years, though the results are less statistically precise. The rent-to-price ratio increases by approximately 18% after one year and 28% after two years, which shows there is a meaningful shift in the relative cost of renting versus owning.
Including consumer expectations of future house price growth into the model makes the results even more pronounced. Both current prices and price growth expectations decrease after a mortgage rate shock. Therefore, rental property owners face higher current costs as well as lower anticipated capital gains, which increases their incentive to raise rents.
Regional variations
The effects of these forces vary significantly depending on where you live in Canada. House prices decrease at a much greater rate in cities where it is expensive and difficult to build new homes (e.g., Vancouver, Toronto). When demand drops due to higher borrowing costs, it is difficult to increase supply, so there are wider swings in housing prices and rents. Conversely, cities in which it is easier and less expensive to build (e.g., Winnipeg, Saskatoon) will experience more modest price swings. However, rents do not vary at the same rate according to city type. Rent increases are driven more by ownership choice channel. Cities that experienced greater declines in first-time homebuyers due to higher mortgage rates also had the highest increases in rents. This makes sense, as higher demand for rental housing leads to higher rents due to lower supply. Cities that had fewer renters moving into the homeownership market experienced less of this effect.
MARCH 2026
The expectations factor
The research also determined that future expectations affect results. When mortgage rates increase, home prices decrease today, and people expect home prices to continue falling in the future. This creates a double dose of bad news for landlords, as their costs increase and their property value does not grow as quickly. As a result, landlords increase rents to make up for the shortfall. Therefore, long periods of high interest rates can have a stronger effect on raising rents than a short-term increase in the interest rate.
Conclusion
Using interest rates to slow down the housing market is not as cut and dry as it seems. Higher interest rates will bring home prices down, which can help homebuyers in the long run. However, in the short and medium term, higher interest rates also means higher rents, which affects those who tend to rent the most. The effect of interest rate swings is felt more sharply at the local level, as it depends more greatly on local housing supply conditions. While the Bank of Canada’s decision to increase or decrease interest rates will affect the rental housing market, the effects are not always evenly distributed, as they will depend on where the property is located.
Visit https://www.bankofcanada.ca/wp-content/uploads/2026/02/sap2026-2.pdf to read the full staff analytical paper.
Renter interest is rising. Does your website build trust fast enough?
By Peter Altobelli, VP and General Manager, Yardi Canada Ltd.
The Canadian market is rebalancing
The latest Yardi Canadian National Multifamily Report shows a shift that makes speed and trust more important than ever. National average apartment vacancy rose to 4.5% in Q4 2025, the highest level since 2020, while national average annual turnover climbed to 25.5%, signalling more resident movement and more unit turns.
That mix means housing providers are competing harder for every qualified lead, while leasing teams are under pressure to do more with less. Renters are also more mobile, and many are searching from outside your local market. If your website doesn’t build trust quickly, prospects will move on.
Your website is the first leasing conversation
For renters relocating across provinces or cities, your property website is often the first and most influential touchpoint. RentCafe.com’s Q4 2025 Canada Renter Interest Report shows renters are actively looking beyond major hubs, with Moncton, Hamilton and Halifax ranking as the top three cities for renter interest, making that first impression even more important.
In today’s market, speed matters, but trust determines whether a renter takes the next step or keeps scrolling.
When a website is vague, outdated or hard to navigate, leasing teams pay the price through repetitive inquiries, missed tours and incomplete applications. A strong, search-friendly website reduces friction by answering core questions early and guiding qualified prospects forward.
The FAQs your apartment website should answer up front
To support faster leasing and better lead quality, make these answers easy to find:
1) What’s available and what does it cost?
Show real-time availability, floor plans, photos, unit types and rent ranges so prospects can self-qualify. Clearly outline what’s included (such as heat, internet/cable, in-suite laundry, etc.), detail parking options and state pet policies up front.
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Energy Audits and Modelling
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MARCH 2026
2) Where is the property and what’s nearby?
Mobile renters won’t know local shorthand. Add a neighbourhood score with practical local context, including transit, walkability, commute anchors, nearby schools, parking and everyday essentials.
3) What amenities and policies matter day to day?
List what’s on-site and what has restrictions or fees, including pet rules, smoking policies, storage, laundry, package handling and security.
4) Is this property legitimate and safe to apply to?
Renters searching from a distance are alert for fraud. Build trust with current photos, 3D tours, videos and maps, plus clear contact details, office hours and an easy way to book a tour.
5) What happens after I apply?
Outline the post-application process, including required documents, timelines and next steps. Clear expectations reduce uncertainty and limit status-check emails.Top of FormBottom of Form
Build trust early with user-friendly sites and automated screening
Trust starts before the application. A user-friendly, search-friendly website helps renters find answers fast with clear headings, plain-language messaging and pages that match how people search. That reduces confusion and unnecessary inquiries, so leasing teams can focus on qualified prospects.
Screening and verification can also happen early. Identity verification (including biometrics) and background checks before a tour help reduce fraud and confirm serious prospects, especially from out of market.
Automation should be practical: instant FAQ replies, tour confirmations and reminders, application status updates, document requests and next-step emails. The goal isn’t to replace your leasing team. It’s to remove busywork so your people can focus on higher-value conversations.
The bottom line
People are on the move, and decision windows are shrinking. Housing providers that treat their websites as a trust-building tool, not just a digital brochure, will reduce friction, improve lead quality and lease faster in a changing Canadian market.
Learn how Yardi Breeze Premier can help housing providers market smarter, build trust faster and lease more efficiently at yardibreeze.ca.
RHC Conference coming to Ottawa in 2026
The RHC Conference is heading to Ottawa in 2026. Mark your calendars for the conference, which will take place on May 26 – 28, 2026 at the Rogers Centre in Ottawa. This national event will bring together industry leaders, policymakers, and service providers for three dynamic days of innovation, insight, and connection. With a future-focused agenda covering sustainability, leadership, market trends, and housing policy, expect impactful keynotes, expert panels, and powerful networking, all aimed at shaping the future of rental housing in Canada. Visit www.rentalhousingcanada.ca to stay informed.
Sign-up for RHC’s National Outlook e-newsletter to receive up-to-date news on what is happening across Canada, as well as industry insights and insider information on RHC happenings. Email admin@rentalhousingcanada.ca to start receiving RHC’s e-Newsletter today! WANT TO STAY UP TO DATE WITH NATIONAL OUTLOOK?
JOIN CANADA’S RENTAL HOUSING LEADERS IN OTTAWA FOR THE RHC NATIONAL CONFERENCE
The rental housing sector is evolving and the conversations shaping its future matter more than ever.
This May in Ottawa, Rental Housing Canada’s national conference brings together the leaders shaping what comes next Building Momentum is about accelerating new development, unlocking innovation, and using technology to build, operate, and scale rental housing that meets the needs of Canadians—now and into the future
Over two dynamic days, owners, developers, operators, and industry partners will dive into the ideas, tools, and strategies driving progress across the sector. Expect forward-looking conversations, practical insights, and connections that move beyond talk and toward action turning innovation into housing, and momentum into impact.
OTTAWA MAY 26-28
