Apartment rents are now declining across the country on a year-over basis for the first time in more than three years, according to a national survey.
National asking rents for all residential property types declined by an average of 1.2% in October from a year earlier, the first annual rent decline since July 2021, according to the National Rent Report from Rentals.ca and data firm Urbanation. Average apartment rents across the country were $2,152 per month, about a $49 reduction per month since July.
"It is a rare occurrence for rents to decline at the national level. This is happening as the key drivers of rent growth in recent years, a strengthening economy, quickly rising population, and worsening homeownership affordability are beginning to reverse," Urbanation President Shaun Hildebrand said in the report's commentary.
As a result of the trends, "we can likely expect this trend for rents to continue in the near term, particularly as apartment completions remain at record highs," Hildebrand said.
While the survey found average rents were dropping across the country, Canada's largest apartment real estate investment trust managed to buck the trend.
Toronto-based Canadian Apartment Properties REIT reported month rents in its domestic portfolio averaged $1,617 at the end of September, up from $1,490 a year earlier. The REIT has a portfolio of more than 63,000 suites in Canada and the Netherlands.
CAPREIT's said its Canadian portfolio was 98% occupied at the end of the quarter, down from 98.9% a year earlier. The company's diluted funds from operations per unit rose 3.3% to $0.659 for the three months that ended Sept. 30 from a year earlier. FFO is a key indicator of a REIT's financial performance.
Costs offset gains
Stephen Co, chief financial officer of REIT, said while rents drove net operating income, gains were offset by higher interest-rate costs.
"Our leverage remained low at 40.9% as of period end, and we continue to have ample access to capital, which puts us in a prime spot to execute quickly on strategic transactions," Co said in a statement.
The trust has continued with its plan to update an aging apartment portfolio. So far this year, it has completed over $1 billion of transactions across Canada and Europe and announced nearly $2 billion in additional property dispositions expected to close by early 2025.
"This activity is unprecedented for CAPREIT, but it speaks to our commitment to repositioning our diversified portfolio and our focus on high-quality Canadian apartment properties," CAPREIT CEO Mark Kenney said in a statement.
CAPREIT's strength comes as the Rentals.ca report found the largest rent decreases were in British Columbia, which were down 3.4% from a year ago to an average rent of $2,549, and Ontario, off 5.7% to $2,350. Quebec's average rent dropped just by 0.5% to $1,966.
The country's largest city was hit the hardest, as rents in Toronto were down by an average of 9.2% from a year earlier to an average of $2,642. Vancouver saw the second-largest drop, with a decline of 8.4% from a year ago to an average of $2,945 per month.
Calgary and Montreal saw 4.7% and 2.9% year-over-year, respectively. Edmonton rent rose 8.4% over the tear but was still the country's most affordable large city at $1,584, according to Rentals.ca