The headline in the latest national rent report is easy to summarize: asking rents fell 4.8% year over year in August, to an average of $2,035, the 23rd consecutive monthly annual decline.[1] Underneath it are two different markets, and they're splitting by size.

The spread inside the average

The August report from Rentals.ca and Urbanation shows how unevenly the correction has landed:[1]

  • Purpose-built rental, all units: $2,038, down 3.3%
  • Purpose-built three-bedrooms: $2,734, down just 1.4%
  • Condominium rentals, all units: $2,050, down 7.7%
  • Condominium studios: down 9.3%
  • Houses, townhomes and other secondary units: $2,014, down 8.3%

Toronto makes the point most clearly. The city's overall average asking rent slipped 1.4% year over year to $2,570. Two-bedroom rents, though, were up 0.3% and three-bedrooms up 3.5%.[1] The weakness sits in the smallest units, and particularly in investor-owned condos built for a buyer who was never going to live there.

Why size is the dividing line

Three forces explain the split.

Supply was skewed toward small suites. A decade of condo presales favoured studios and compact one-bedrooms because they were cheapest per door for investors to buy. That stock is now completing into a softer market at the same time, and its owners are competing for the same tenant: a single renter whose numbers are falling because of lower international student and temporary worker arrivals.

Larger units serve households that can't easily leave. CMHC's 2025 survey found the same pattern in occupied stock: national purpose-built vacancy was 2.1% for three-bedroom-plus units, against 3.5% for studios.[2] Families renting a three-bedroom have few alternatives. Buying a comparable home in the GTA is out of reach for most, and the secondary market offers little family-sized stock with the stability of a professionally managed building. Turnover is lower and lease-up is less competitive.

Purpose-built tenure carries a premium. Purpose-built rents fell less than condo rents across the board. Renters value a landlord who is not going to sell the unit or move in a relative, along with on-site management and predictable maintenance.

Ontario's map is uneven too

The provincial figure, down 3.5% year over year, hides wide local swings.[1] Ottawa asking rents rose 1.1% on the month to $2,168. Barrie posted the largest annual increase in the country at 14.3%, although that mostly reflects one large, higher-priced new project entering the data rather than broad rent growth. At the other end, Scarborough fell 9.3%, one of the steepest declines nationally.

That is the trap in asking-rent data. One new building can move a small market's average sharply, and a wave of condo completions can pull down a neighbourhood whose purpose-built stock is performing normally. Averages describe the listings, not the rent rolls.

What it means for underwriting

For anyone buying, building or lending against Ontario rental housing, the August data suggests a few practical adjustments:

  • Model rents by suite type, not by building. A blended rent-per-square-foot assumption hides the difference between a studio competing with condo listings and a three-bedroom with almost no direct substitutes.
  • Look hard at studio-heavy rent rolls. Buildings where most suites are studios and junior one-bedrooms face the most direct competition from condo investors willing to cut rents to cover carrying costs.
  • Value larger suites in new development. Family-sized units cost more to build and fit fewer doors on a floorplate, but this data argues for pricing in their lower vacancy and turnover risk, not just their lower unit count.
  • Separate the asking market from the occupied one. Asking rents set the price of the next lease. They don't reprice existing tenants, so in-place revenue moves much more slowly.

The correction is real, and it's not finished. It is also selective. In 2026, a building's mix of suites says more about its rental income than its postal code does.

Sources

[1] National Rents Fall for First Time in Five Months as Annual Decline Widens to 4.8%, Rentals.ca and Urbanation (Sept. 9, 2026): https://press.rentals.ca/470657-national-rents-fall-for-first-time-in-five-months-as-annual-decline-widens-to-48

[2] Primary Rental Market Statistics, Canada, CMHC Housing Market Information Portal: https://www03.cmhc-schl.gc.ca/hmip-pimh/en/Profile/DetailsPrimaryRentalMarket?geographyId=1&t=1