November 2025 - The Money Machine - Rentals - A Market In Transition

Real estate goes in cycles. I think we all realize that. Sometimes, as was the case during the COVID era, properties are in hot demand. Buyers are frantic to get their hands on them. Sellers are reluctant to put their homes on the market, knowing they will be quickly snapped up, but they are fearful they won’t find one to buy. Multiple offers are the norm on most listings. People outbid one another, and sales generally go for above the asking price. We call this situation a seller’s market. Then there is the opposite extreme. A large inventory of listings just sits on the shelf. Sellers reduce their price to get their property to compare favourably to the competition. Buyers are very selective. They pick things over very carefully, and often when they do submit an offer, it is far below asking. Realtors are anxious to work with buyers, but much less enthusiastic about taking listings, many of which will eventually expire unsold. We call this a buyer’s market. And then there is the middle ground. There is a reasonable amount of inventory. Buyers have some choices available to them, but properties do sell when exposed to the market for a reasonable period of time. And it seems in most cases negotiations don’t typically favour either the buyer or the seller. We call this a balanced market. Over any given period of time, markets shift from a buyer’s market, through a balanced market and on to a seller’s market. And then back again. I think what we are prone to forget, however, is that this cycle that exists when buying and selling real estate also applies to the rental market. Boom, bust and balanced. The reason we don’t think much about it when it comes to real estate rentals, specifically residential real estate rentals, is that we have had such a strong rental environment, especially here in Ontario, that we just take it for granted that that is the way it always has been and always will be. But that’s not the case, and quite frankly, that is dangerous thinking. There are a number of reasons the rental market has been so strong for landlords. Canada’s immigration policies and practices have created a lot of demand, while at the same time, rent controls and the hostile imbalance of the landlord-tenant board have caused builders, developers and investors to shy away from building rental properties. So, with reduced inventory and increased demand, landlords have had no problem renting their units almost regardless of condition. But that is starting to change. The government has reacted to the housing crisis and implemented a number of measures to increase inventory. Accessory dwellings in pretty much all municipalities, regardless of zoning, have created a large number of new units, as have grants for the building of units both within and exterior to existing dwellings. Grants for the conversion of non-residential units to residential units and incentives for builders to build residential units have all created increased inventory. At the same time, the government has not only reduced immigration, but they have also put a moratorium on non-residential buying of single-family and small multi-family buildings. There has been a drastic reduction of visa permits for foreign students, impacting both university enrollment and also demand for student housing. And added to that, condos, which require a long period of time from conception to finalization, are now coming on the market, being planned during the most recent boom. Buyers, many of whom were speculators, can’t afford to sell these units in our current real estate market, so they have been dumped on the rental market. All this is having an effect. Already we’re seeing signs of both decreases in asking price for rentals, and signs are appearing promising one, two, or even three months rent free to new tenants. The market is swinging from a landlord’s market to a tenant’s market. And it’s going to get worse. Landlords need to be aware of this trend and take steps to ensure that their rental units are always in good condition when a vacancy comes up. We’ll take a look at some practical action plans in next month's newsletter.