Canada's multi-family rental vacancy rate climbed to 4.3% in the third quarter of 2025, marking the second consecutive quarter at a five-year high. That's up 110 basis points year-over-year and 20 basis points from the 4.1% recorded in Q2.

The latest Yardi report, drawing on data from over 511,000 units across 5,800 properties, shows a market in transition. After years of rental demand outpacing supply, the balance is shifting. And landlords are starting to feel it.

"Vacancy is rising, and the market is entering a new chapter," said Peter Altobelli, vice president and general manager of Yardi Canada. "With shifting demographics, economic uncertainty and growing supply, housing providers must rethink how they forecast, invest and operate."

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Montreal Leads Vacancy Increases

Montreal saw the biggest vacancy increase in the third quarter, with the rate climbing 1% year-over-year to 5.6%. The increase came after the market's purpose-built rental housing inventory rose 3.3%.

That's a lot of new supply hitting the market at once. Developers rushed to build during the rental boom of 2021-2023 when vacancy rates were near zero and rents were climbing 8% to 10% annually. Those projects are completing now, just as demand is softening.

Calgary maintained the highest vacancy rate at 5.8%, though its vacancies dropped 90 basis points quarter-over-quarter. That suggests Calgary's market is stabilizing after a sharp spike earlier in the year.

On the other end, Winnipeg at 2.4% and Halifax at 2.8% had the lowest vacancy rates. Both markets remain tight, with demand still outpacing supply despite the national trend toward higher vacancies.

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Bachelor Units Are Getting Hit Hardest

Bachelor unit vacancy reached 6.7% nationally, the highest among all unit types. Toronto's bachelor suite vacancy rate of 8.9% was well above the national average.

Bachelor units tend to attract younger renters, international students, and recent immigrants. All three demographics have weakened significantly over the past year.

The federal government cut immigration targets. International student enrollment dropped after new restrictions on study permits. And younger adults, facing high unemployment rates, are delaying moving out or moving back in with family.

High-end urban rentals that catered to affluent foreign students are feeling this immediately. Landlords who once counted on a fresh cohort of international renters each fall are now facing unexpected vacancies.

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Rent Growth Is Slowing Dramatically

The average national in-place rent increased $14 to $1,734, but the annual growth rate dropped 90 basis points year-over-year to 3.9%. That's a significant deceleration from the 6% to 8% annual growth rates of 2022 and 2023.

New-lease rent growth slowed even more dramatically to just 2.4% nationally. That's the rent landlords are getting when they sign new leases with incoming tenants, and it's a forward-looking indicator of where the market is headed.

Former market leaders like Calgary saw lease-over-lease rents actually fall 3%. That's not just slower growth. That's negative growth. Landlords are accepting less rent than they were getting a year ago.

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Regional Variation Remains Significant

Halifax, driven by its growing technology sector, saw the biggest year-over-year in-place rent increase at 5.9%, a $29 rise to $1,634. Halifax also posted the largest new-lease rent increase at 4.9%.

Edmonton at 4.9%, Saskatoon at 4.7%, and Montreal at 4.6% also posted strong rent gains. These markets benefited from sustained in-migration and relatively limited new supply compared to larger markets like Toronto and Calgary.

On the other end, Calgary with its 3% decline, Hamilton at 0.3%, Kitchener-Cambridge-Waterloo at 0.8%, Toronto at 1.2%, and Vancouver at 1.4% were the worst-performing markets for new-lease rent growth.

The pattern is clear. Markets that overbuilt during the boom are now seeing rents stagnate or decline. Markets with tighter supply conditions are still seeing modest growth.

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Landlords Are Offering Concessions

In response to rising vacancy, some landlords are offering rent concessions such as free rent periods and move-in incentives. That's a significant shift from the landlord's market of 2021-2023, when tenants competed for units and landlords could demand premium rents with no incentives.

Free rent periods, typically one month on a 12-month lease, effectively reduce the annual rent by 8.3%. Move-in incentives like waived application fees, discounted parking, or gift cards add up. These concessions don't always show up in reported rent figures, but they represent real discounts that affect landlords' bottom lines.

The national turnover rate remained low at 23.4% despite modest increases in some regions. That means most existing tenants are staying put, likely because they're locked into below-market rents from leases signed in previous years. Landlords are competing primarily for new tenants, which explains why new-lease rent growth is lagging so far behind in-place rent growth.

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What's Driving the Shift?

Three factors are converging to push vacancy rates higher and slow rent growth.

First, slower population growth. The federal government cut immigration targets significantly in 2025. International student enrollment dropped after new restrictions. The result is fewer new households forming and less rental demand.

Second, rising supply. Years of record-high apartment construction are now delivering units. In the 12 months ending mid-2025, only about 11,300 rental units were absorbed nationally, less than half the number of new units delivered in that period. That imbalance is creating upward pressure on vacancy rates.

Third, economic weakness. The unemployment rate among younger adults, a key renter demographic, has climbed to its highest level in years. More young adults are delaying moving out or are moving back in with family. Others are doubling up with roommates to save on rent. This trend is slowing net absorption even as total population still grows.

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The Market Remains Healthy, Just Less Hot

Yardi's analysis indicates that despite rising vacancy, the market remains fundamentally healthy. A 4.3% vacancy rate is not a crisis. It's closer to a balanced market than the sub-2% rates that defined the rental boom.

"In the midst of an uncertain economic climate, Canada's multi-family market is maintaining moderate rent growth and strong demand in most markets," Yardi stated in the report.

The issue isn't that the rental market is collapsing. It's that the market is normalizing after years of extraordinary tightness. Landlords who got used to 8% annual rent increases and zero vacancy now need to adjust to 3% to 4% rent growth and modest vacancy.

For tenants, this is the first relief they've seen in years. Higher vacancy means more choice. Slower rent growth means affordability pressure is easing, at least slightly. And concessions mean some tenants are actually paying less than advertised rents.

Investment Implications

For real estate investors, this shift creates both challenges and opportunities.

Challenges first. Properties purchased at peak valuations in 2021-2022 when cap rates were compressed to historic lows are now facing softer operating performance. Lower rent growth, higher vacancy, and concessions all reduce net operating income. That puts pressure on valuations and could create issues for investors who need to refinance or sell.

The average price per unit has fallen to about $300,000, down roughly 30% from the $422,000 per unit highs of 2021-2022. Values have held better than transaction volumes, reflecting owners' reluctance to sell at discounts. But distressed situations are emerging, particularly for properties with maturing debt and insufficient cash flow to cover higher interest rates.

On the opportunity side, the market correction is creating buying opportunities for investors with capital and patience. Cap rates have expanded from historic lows, average apartment cap rates rose into the mid-4% range, which provides better risk-adjusted returns than the sub-4% rates that prevailed during the boom.

Markets like Calgary that saw sharp vacancy spikes may represent value opportunities if the vacancy stabilizes and rent growth resumes. Properties offering concessions today could see those concessions eliminated as markets tighten again when the current supply wave is absorbed.

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What Happens Next?

The trajectory depends on population growth, economic conditions, and how much new supply continues to hit the market.

If immigration remains suppressed and economic weakness persists, vacancy could climb higher before stabilizing. Some analysts project national vacancy could reach 4.5% to 5% by mid-2026 if current trends continue.

If immigration targets rebound and the economy stabilizes, vacancy could plateau or even decline as the current supply wave gets absorbed. Purpose-built rental starts have already slowed significantly, which means less new supply is coming in 2026 and 2027.

The most likely scenario is gradual normalization. Vacancy settles somewhere in the 4% to 5% range, rent growth moderates to 2% to 3% annually, and landlords adjust their expectations accordingly. That's not a crisis. It's just a different market than the one that existed from 2021 to 2024.

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How Coldwell Banker Horizon Realty Can Help

At Coldwell Banker Horizon Realty, we understand that rental market dynamics affect both residential real estate values and investment opportunities. Whether you're a landlord managing rental properties, an investor evaluating multi-family assets, or a homebuyer trying to understand how rental supply affects purchase decisions, we provide the local expertise and market knowledge you need.

Rising vacancy rates and slower rent growth have implications beyond just the rental market. They affect condo values, particularly in investor-heavy buildings. They influence development feasibility and what gets built next. And they shape neighborhood dynamics as rental supply increases.

Contact Coldwell Banker Horizon Realty today to discuss how these rental market trends are affecting your area and how you can make informed real estate decisions based on current conditions.

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The Bottom Line

Canada's rental vacancy hit 4.3% in Q3 2025, the highest level in five years. Rent growth is slowing, bachelor units are seeing the highest vacancy, and landlords are offering concessions for the first time in years.

This isn't a market collapse. It's a market normalization after years of extraordinary tightness. For tenants, that means relief. For landlords, it means adjustment. And for investors, it means both challenges and opportunities depending on when you bought and what your exit strategy looks like.

The rental boom of 2021-2023 is over. What comes next is a more balanced market where landlords compete for tenants, rent growth moderates, and vacancy provides some breathing room. That's healthier long-term, even if it feels uncomfortable for landlords who got used to having all the leverage.