theANNUAL National 2024 - Realty Check by Marc Cote

Foreword

In 2024, Canada’s multifamily real estate market— particularly in Ontario—entered a de fning period of transition, marked by shifting investor expectations, recalibrated pricing models, and a renewed focus on operational fundamentals. Following years of market volatility, 2024 has brought clarity around core market dynamics, even as fnancing challenges and economic uncertainty persist.

The rental housing market continues to be underpinned by extremely strong fundamentals. Ontario alone added more than 500,000 new permanent and temporary residents this year, including a signifcant number of immigrants and international students. This rapid population growth has sharply increased demand for rental housing, while new housing supply—especially rental units—has not kept pace.

Rising construction costs, which have outpaced infation, have made homeownership increasingly inaccessible for many, prolonging tenancy durations and contributing to record-low turnover rates. In key urban markets vacancy rates remain near zero, and average asking rents climbed throughout the year, with a slight decline in the latter part of the year.

With turnover down and tenants staying in place longer, the ability for investors to reset rents to market levels has become more limited—posing a challenge for value-add strategies. Investors are now placing greater emphasis on in-place income, debt assumptions, and asset-specifc factors when underwriting deals.

While transaction volumes have not yet returned to pre-slowdown levels, momentum is gradually building. A notable re-engagement of capital has occurred in 2024, with investors who had been on the sidelines now looking to deploy funds in a more stable market. A signifcant share of this interest is directed at newer purpose-built rental buildings, particularly those completed after 2018 and exempt from Ontario’s rent control measures. These assets offer investors greater fexibility to adjust rents to market rates and capture future income growth.

At the same time, Ontario’s older multifamily stock continues to retain its appeal. Construction of new rental supply remains dif fcult due to cost and regulatory hurdles, which has helped existing assets hold value. In some cases, operating expenses have stabilized or even declined, enhancing overall asset performance.

There is also a growing pipeline of potential sellers—including fund managers reaching maturity, intergenerational owners planning transitions, and developers seeking to recycle capital. Many of these owners have delayed bringing assets to market, waiting for more favorable transaction conditions. That inventory is beginning to re-emerge, bringing with it the potential for increased deal fow in the months ahead.

Looking into 2025, there is cautious optimism that interest rates may begin to trend downward or at least stabilize. Bond yields appear to be settling into a more predictable range, which may help close the valuation gap between buyers and sellers. If this trend continues, it could signal a broader reopening of the transaction market and renewed liquidity.

Outlook for 2025

Looking ahead, 2025 is poised to be a year of cautious optimism. While a return to ultra-low interest rates is unlikely, many economists expect some rate relief over the course of the year. If bond yields stabilize and fnancing becomes more predictable, the bid-ask spread may continue to narrow—unlocking more transaction activity and bringing liquidity back to the market.

We also anticipate a re-emergence of sidelined capital. Both private and institutional investors have been patient, waiting for pricing clarity and more consistent macroeconomic signals. With a backlog of owners— ranging from funds nearing maturity to developers looking to recycle capital—the potential for increased deal volume in 2025 is signifcant. The key to market activation will be alignment: between buyer and seller expectations, fnancing conditions, and underlying asset performance.

Operational performance will remain a top priority in 2025. With turnover low and rent control still in place across much of the country, investors will need to drive value through hands-on management, cost ef fciency, and tenant retention. Purpose-built rentals—especially those with fexibility around rents—will continue to attract outsized attention.

In short, 2024 set the stage for a more balanced, thoughtful investment environment. While not without its challenges, the year reaf frmed the strength of Canada’s multifamily market. As the country continues to grow and urbanize, rental housing remains a core need— and a compelling opportunity for investors with a longterm, fundamentals-frst mindset.