Ontario rental market trends: softer demand, rising vacancies, and a new playbook for 2026

Ontario’s rental market is not crashing, but it is changing shape. The biggest shift is competitive pressure: more new supply is landing while demand growth has cooled. That combination is pushing vacancy higher in several Ontario CMAs and forcing operators to work harder for qualified tenants.

Below is the latest read on the market, plus decision-ready moves landlords and property managers can make now (including how to operationalize it in Lease24).

Key numbers (latest available)

CMHC Rental Market Report, Fall 2025 (survey timing: October 2025) 1

• Greater Toronto Area (GTA): purpose-built vacancy 3.0%, average 2-bedroom rent $2,034, up 3.5% year over year. Condo rental vacancy 1.0%, average 2-bedroom condo rent $2,904. 1

• Ottawa: purpose-built vacancy 3.0%, average 2-bedroom rent $1,926, up 3.4% year over year. Condo rental vacancy 0.6%, average 2-bedroom condo rent $2,503. 1

• Hamilton: purpose-built vacancy 3.6%, average 2-bedroom rent $1,656, up 1.6% year over year. 1

• Kitchener - Cambridge - Waterloo: purpose-built vacancy 4.1%, average 2-bedroom rent $1,832, up 3.3% year over year. 1

• St. Catharines - Niagara: purpose-built vacancy 3.9%, average 2-bedroom rent $1,527, up 5.5% year over year. 1

• Windsor: purpose-built vacancy 3.7%, average 2-bedroom rent $1,454, up 3.6% year over year. 1

National context (helps explain the Ontario shift)

• Canada’s purpose-built vacancy rate rose to 3.1% in 2025, up from 2.2% in 2024, with CMHC pointing to historically high rental completions plus slower population and economic growth. 2

• Statistics Canada’s new experimental asking-rent series shows Toronto average asking rent for a 2-bedroom was $2,690 in Q1 2025, down 5.6% year over year (asking rents reflect current market pricing pressure more than sitting-tenant averages). 7

• Canada’s non-permanent resident estimate fell 5.8% quarter over quarter as of Oct 1, 2025, and the estimated quarterly flow of immigrants in Q3 2025 was down 17.2% year over year. 5

Policy and financing signals that matter to operators

• Ontario’s 2026 rent increase guideline is 2.1% (maximum for most guideline-covered increases without an application). 6

• The Bank of Canada held the target for the overnight rate at 2.25% in Dec 2025, which matters for variable debt costs and buyer underwriting. 9

Ontario supply pipeline (why competition is rising)

• CMHC reports 2025 housing starts were up 5.6% vs 2024, with rental housing starts making up just over half of urban starts nationally. 8

• In the GTA specifically, CMHC notes a record number of rental apartments under construction in Q3 2025. 1

• Ontario-focused industry research (Urbanation and FRPO) estimated more than 50,000 purpose-built and condo rental units were added in 2024, and put Ontario’s purpose-built vacancy at 2.7% in 2024 (a useful baseline for the 2025 softening). 3

What is driving this

1) Supply finally shows up, but it is not evenly priced

New completions and a large under-construction pipeline are increasing choice, especially in newer, higher-rent product. CMHC explicitly ties the 2025 easing to supply growth and notes operators using incentives in some markets. 2

So what: if your building competes with new supply (or new condos being rented out), your leasing strategy has to be faster and more precise than it was in 2022 to 2024.

2) Demand growth is cooling, especially where temporary residents matter

Slower growth in non-permanent residents and weaker economic conditions reduce the number of new renter households forming at the same pace as the new inventory landing. 2 5

So what: student and newcomer-driven submarkets can move from “waitlist” to “compete” quickly. Expect more price sensitivity, more comparison shopping, and more negotiation.

3) The market is splitting: tight affordable units, softer high-end lease-ups

CMHC highlights that the most affordable units remain scarce even as overall vacancy rises, while newer, higher-rent product can sit vacant longer. 2

So what: “average vacancy” can hide your real risk. The question is not Ontario vacancy, it is vacancy for your unit type, rent band, and micro-location.

4) Rent caps shape renewal math, not turnover math

With the 2026 guideline at 2.1%, renewal increases for guideline-covered units may not keep pace with operating costs in some properties, while turnover pricing becomes more market-driven and competitive. 6

So what: operators need a two-track revenue plan: renewals (disciplined, compliant) and turnovers (market-aware, incentive-ready).

What it means for landlords and managers

Expect “leasing friction” to rise

In several Ontario CMAs, vacancy rates are now in the 3% to 4% range in the purpose-built segment. 1 That typically means:

• longer decision cycles for tenants

• more showings per lease

• more pressure to offer concessions (or value-add alternatives)

Risk: occupancy dips can arrive faster than budgets adjust, especially in assets with concentrated lease expiries.

Your biggest lever is retention, not rent growth

When market asking rents soften, the cheapest vacancy is the one you prevent. Use retention tactics that do not permanently reset your rent roll:

• early renewal offers with small, compliant increases

• unit refreshes targeted to your most at-risk tenants

• service improvements that reduce complaints and move-outs

Lease24 angle: build a renewal pipeline, automate reminders, and track concessions and effective rent by unit so your team is not guessing.

Underwrite 2026 with effective rent, not sticker rent

If you are using incentives (free month, move-in credits, parking bundles), start budgeting on effective rent and measure payback time. CMHC notes incentives as a response in softer markets. 2

Risk: inconsistent incentives create fairness issues and resident dissatisfaction. Standardize your offers by unit type and exposure.

The condo rental market can keep pressure on purpose-built

Condo rental vacancy remains low in the GTA and Ottawa in the CMHC data, but it is still a competing pool of “newer-feel” units. 1 When resale markets soften, more investor-owned condos can show up for rent, increasing choice for tenants.

Risk: your older stock competes against “newer finish” expectations. Win on reliability, service, and transparent pricing.

Action checklist (next 30 to 90 days)

Pricing and leasing

• Reprice using weekly comparables, not last quarter’s averages (track asking vs achieved). 7

• Create 2 to 3 standardized incentive packages and cap them by unit type and exposure days (measure effective rent). 2

• Tighten lead response time (same-day showings for qualified leads).

Portfolio operations

• Map lease expiry concentration and prioritize retention outreach 120 to 150 days out.

• Track turn costs and turn time, and set a hard target to reduce vacancy days by a specific number.

• Audit your “affordable band” units, these often lease fastest even in softer markets. 2

Risk and compliance

• Separate your renewal strategy (guideline-driven) from turnover strategy (market-driven). 6

• Update underwriting: include downside occupancy and incentive assumptions in 2026 budgets.

• Stress test variable-rate or refinancing exposure (rates held at 2.25% as of Dec 2025). 9

Systems (how to make it stick)

• Use Lease24 to tag units by rent band, exposure days, and incentive type, then review weekly.

• Build a single dashboard: occupancy, effective rent, lead-to-lease conversion, days vacant, and renewal acceptance rate.

Disclaimer: General information only, not financial or legal advice.