Nationally, rents have been inching downwards over the last six months, and this is the case in the Greater Toronto Hamilton Area (GTHA) as well. According to Urbanation’s rental market report for the first quarter of 2025, purpose-built rental rents in the GTHA decreased 7% year over year, on average, after adjusting for the increase in occupancy incentives as developers vie to fill units.
The percentage of rental buildings that offered incentives last quarter doubled compared to Q1-2024, jumping from 31% of buildings to 63%. Of the incentives offered, 39% of projects offered free rent for one month, while 23% offered two months of free rent.
Taking into consideration how free rent incentives impact average rents, Urbanation calculated that average rent was around $2,804 in Q1-2025, based off of the average unit size being 719 sq. ft and the average price being $3.90 per sq. ft.
With incentives taken out of the equation, GTHA rents still fell 2% on an annual basis in Q1 to $2,909, or $4.05 per sq. ft, which is no surprise given that the vacancy rate for purpose-built rentals built after 2000 grew from 2.6% to 3.5% year over year — the highest it’s been since Q2-2021.
The vacancy rate for purpose-built rentals was even higher in the City of Toronto at 3.7%, but in all regions, on average, studio units had the highest vacancy rate of 6.2%, while on the other end of the spectrum, more scarce three-bedroom units had a vacancy rate of just 2.8%.
On the condo front, rents also fell as listings increased, with average rents falling annually for the fourth consecutive quarter. In the GTHA, condo rents fell 2.8% to $3.78 per sq. ft (or $2,612 for 692 sq. ft), while listings rose 29% compared to last year and 160% compared to two years ago to 6,549 units. This represents an inventory of 1.4 months of supply.
While the downtrend in rents may not please investors, it is indicative that the market is rebalancing into more affordable territory for renters, thanks largely to the influx of new buildings coming to completion, as well as reductions in immigration, temporary foreign workers, and international students, which are some of the groups that typically occupy rentals.
‘Influx’ of new supply might be an understatement, however, as new purpose-built rental completions in Q1 2025 totalled 2,136 units — up 173% from the same period last year and the second highest quarterly total in the last 30 years. And that’s without counting condo unit completions underway.
“The rental market is undergoing a period of improved affordability thanks to recent increases in supply. This is a good lesson that more supply can help bring down costs for renters,” said President of Urbanation, Shaun Hildebrand in a press release. “However, this is not expected to last much longer given the current downtrend in construction for both purpose-built rentals and condominiums.”
The downtrend Hildebrand points to was on full display in the first quarter as GTHA purpose-built rental construction starts fell 60% on an annual basis to 731 units. Some of the largest decreases were seen in the 905 Region where inventory of rental units underway fell to a 17-quarter low of 5,408 units and in the City of Toronto where under-construction units hit their lowest level since Q3 2023.