Rental market swings back in tenants’ favour with lower prices and move-in incentives

The CN Tower can be seen behind condos in Toronto's Liberty Village neighbourhood in Toronto on Tuesday, April 25, 2017. THE CANADIAN PRESS/Cole Burston

The “new year’s special” advertising a two-bedroom unit at a midtown Toronto highrise might be what draws you in when searching for your next home — an offer for up to three months of free rent, plus a $500 “move-in bonus.”

Or perhaps a year of complementary internet, on top of two months’ free rent, sweetens the deal for those interested in a rental promoted in central Vancouver.

Landlords across Canada are increasingly dangling such incentives, along with other common perks like free parking, waived pet fees and moving allowances, to compete for new tenants. After a post-pandemic surge in rental costs, real estate watchers say the scales have tipped back in favour of renters amid falling prices, higher vacancy rates, and uncertainty in the housing market overall.

“It’s a race to the bottom,” said Marco Pedri, a Toronto-based broker with Shoreline Realty who specializes in leasing transactions.

“We talk about the inventory of all these new buildings. These landlords are competing with one another, driving the prices down.”

That trend seems poised to continue for much of this year, especially after 2025 marked the second consecutive year of record rental housing starts in Canada. Experts say more apartment completions are also expected this year as projects wrap up, giving renters additional choice.

“The math works better for rentals than for large home ownership projects right now,” said Mathieu Laberge, Canada Mortgage and Housing Corp.’s chief economist.

But with so many new listings and prices falling, the question is whether demand from renters will follow in 2026.

Some real estate agents believe that’s already begun.

Tom Storey of Royal LePage Signature Realty said 2025 was one of his team’s biggest years for leasing transactions. He said demand for rentals gained steam as fewer clients were willing to step off the sidelines in the sales market.

“What was clear to me is that the need for real estate hasn’t changed, but in 2025, how people chose to access it was a lot more on the leasing side than the purchase side,” said Storey, adding that declining sales prices and lower interest rates have also prompted buyers to hold off as they wait for the market to “bottom out.”

“That seems to me one of the many reasons why people chose to rent for the short-term, because rental prices had dropped as well. Starting rents in 2025 were lower than they were in 2024 and 2023.”

December 2025 marked the 15th consecutive month that average asking rents fell nationally year-over-year, according to analysis from Rentals.ca and Urbanation based on listings data from the former’s network.

They say average asking rents in Canada fell 3.1 per cent overall in 2025 and are down 5.4 per cent from two years ago. In December, asking rents fell around eight per cent in Vancouver, five per cent in Toronto and Calgary, two per cent in Montreal and 0.5 per cent in Ottawa on an annual basis.

But affordability concerns linger.

At $2,060, the overall average asking rent in Canada last month was down 2.3 per cent from a year ago. But that’s still nearly three per cent higher than the national average asking rent of three years earlier, according to the report.

Asking rents are also still around 14 per cent higher than pre-pandemic levels of December 2019.

Rentals.ca spokesman Giacomo Ladas said property managers are now coping with a double whammy — lots of new supply available, plus a relatively shallow pool of renters.

While some tenants are still feeling priced out of the market, movement has also slowed after the federal government introduced an immigration cap, which has stunted population growth. Demand also typically cools in the winter months, he said, resulting in both lower asking prices and incentive offers aplenty.

“What’s important to note as well is that we are still expecting a lot more supply coming into the market,” said Ladas, noting about 180,000 units are currently under construction across Canada.

“Based on the end of last year, we were seeing negative population growth, so we don’t expect demand really to pick up any time soon, but more supply is on its way. Because of that, we see vacancy rates increase.”

Meanwhile, the rental market wasn’t immune to last year’s widespread economic uncertainty linked to trade concerns, which clouded Canada’s real estate outlook.

Some local real estate boards say the trade dispute led to fewer resale transactions than initially forecasted. Many potential first-time buyers took a wait-and-see approach that still lingers, holding onto their rentals instead of moving forward with plans to own.

Similarly, renters were less inclined to pay premium prices, said Ladas, even though developers pushed ahead with purpose-built rental projects, having borrowed money to build them before tariffs went into effect.

“People were staying in their rental apartments longer and we weren’t seeing turnover rates increase,” he said.

The average two-bedroom turnover unit rent declined in Vancouver, Calgary, Toronto and Halifax last year, according to CMHC data.

The national housing agency said the vacancy rate for purpose-built rental apartments sat at 3.1 per cent in the fall, up from 2.2 per cent at the same point in 2024 and above the national 10-year average.

Laberge said the agency believes 2026 will be another renter-friendly year in most Canadian markets. With additional supply expected from other ongoing projects, he said it will give incomes time to catch up to rent growth of previous years.

“When the turnover rents start going down, there’s more fluidity in the market,” he said.

For now, the dynamic has allowed clients more freedom to pick and choose where they live, said Pedri.

A more affordable environment means they can prioritize factors such as location or amenities when moving, instead of having to settle. Pedri said many are also opting to lock into rent-controlled units while prices are lower.

“I truly don’t see landlords jacking up rent by an absurd amount (this year),” he said.

“At the end of the day ... I see more landlords caring about the relationship with the tenants than caring about trying to squeeze every nickel and penny out of them.”

This report by The Canadian Press was first published Jan. 25, 2026.

Sammy Hudes, The Canadian Press