The monthly rent for a two-bedroom apartment in Vancouver may rise to $7,750 per month in 2032, according to a new study by Concordia University in Montreal and private equity real estate firm Equiton.
Other large Canadian cities will see rents surge over the next decade, according to the report titled "AI-Driven Insights into Key Factors Influencing Canada’s Rental Market." The 16-page report from Concordia and Equiton employed artificial intelligence tools to analyze federal government population and immigration projections.
Canada's apartment market has experienced strong demand and a lack of supply that has buoyed rents. The country's vacancy rate for all apartments is 2.1%, according to CoStar data.
"Canada's national multifamily market remained extremely tight as of mid-year 2024," CoStar said in a recent report. "Vacancy sits at multi-year lows while year-over-year rent growth by most measures remains close to double-digit levels."
The report issued by from Concordia and Equiton was credited to Dr. Erkan Yönder of the John Molson School of Business of Concordia University and Equiton and cited several factors pushing up rents, including an increase in the number of people working from home and high immigration and non-permanent resident growth.
“Last year, Canada welcomed roughly the same number of migrants as the United States, a country some 10 times its size,” the study authors reported.
Vancouver rents highest
In Toronto the average rent for a two-bedroom apartment was $3,250 in March 2023. That is projected to rise to $4,100 in 2027 and then $5,600 by 2032, according to the Concordia-Equiton report. The hikes represent a 26% rise by 2027 and an additional 37% hike by 2032.
In Montreal the average rent for a two bedroom apartment in Montreal is projected to rise from $2,100 in March 2023 to $3,325 by 2027 and to $4,325 by 2032, the report said.
In Vancouver the average rent for a two bedroom apartment in Vancouver was $3,450 in March 2023 and is projected to rise to $5,200 in 2027 and $7,750 in 2032, according to the report.
Meanwhile Calgary is the only city in the study study that is projected to see less-drastic increases in its rental rates, according to the study that projected the average monthly rent for a two bedroom apartment in the Alberta city will rise to $2,200 in 2027 and $2,600 by 2032. In March 2023, the average rent for a two bedroom was $1,900 a month.
The report suggested that the supply of apartments needs to increase by six to 10 times in major Canadian cities in order to “cope healthily with demand shifts."
That appears highly unlikely to happen, according to the study authors. Canada would need to build 5.8 million new housing units by 2031, including 2.2 million rental units in order to keep rents reasonable, according to the Canada Mortgage and Housing Corp.
However Canada has only built a total of 570,000 apartments over the last three decades and less than 200,000 total housing units per year based on the last 50 years of data.
Even if the newly built residential units were to be completed, they may not be affordable for many Canadians. The vacancy rate for new apartment buildings completed after 2020 reached almost 10% as of mid-2024, according to an article by CoStar Chief Economist and head of market analytics for Canada Carl Gomez. Meanwhile vacancy sit at under 2% for apartments built between 1990 and 2020 and 1% for apartments built before 1990.