August Short-Term Rental Market Update

More choices, softer prices, and a shifting balance between landlord and renters are defining the month’s rental scene. Plus, learn what TRREB’s most recent Rental Market Statistics have to say about performance in Q2. 

Key takeaways:

• Landlord leverage has lessened: With vacancy rates nearing 3.7% in the city and landlords eager to fill units, tenants have far greater negotiating power and more ability to secure longer leases, perks, or discounted rents.
• Analysts and industry reports forecast that most GTA neighbourhoods will see continued softness in prices and generous incentives for renters throughout 2025, unless there is an unexpected drop in demand.

Finding shelter from the heat in Toronto this August is arguably easier than it was last – at least that’s according to recent data. TRREB’s Rental Market Statistics reinforce an ongoing pattern in demand. It’s all fueled by strong population growth and declining ownership rates across the GTA. Rental transactions have increased while available unit inventory of units has remained high from a historic perspective. 

Let’s look at the numbers for better context.

Number of listings in Q2 2025: Up by 16 per cent year-over-year to 27,060.

Number of leases in Q2 2025: Up by 16.6 per cent compared to Q2 2024 to  20,417.

Average one-bedroom rents: Down by 5.1 per cent year-over-year in Q2 2025 to $2,326. 

Average two-bedroom rents: Down by 3.5 per cent over the same period to $3,066.

What does this all mean? A welcome break in costs among renters, for one. While still far from affordable, any and all savings in housing expenses are welcomed as inflation persists across the country and around the world. For the first time in a long time, prospective leasees have just a little bit of actual leverage over landlords. We’re seeing more willingness to negotiate from the latter cohort, and in some cases, incentives as well. Retrospective data a few months from now may reflect it in longer leases and below-average rents for high-price units.

Major reports anticipate that average rents for both condominiums and purpose-built apartments will either hold flat or decrease slightly for the remainder of 2025. Studio and one-bedroom units, in particular, stand to be affected the most. 

But while the softening is notable, it’s crucial to remember the broader context: Toronto remains one of North America’s least affordable rental cities. At $2,326 for a one-bedroom and $3,066 for a two-bedroom, average rents are still much higher than pre-pandemic levels, and they exceed what’s considered affordable for most median-income households. Wage growth has lagged, and key affordability benchmarks—like rent-to-income ratios—remain stretched. For newcomers, students, and young professionals, the challenge is still “less unaffordable” rather than affordable. Still, the year-over-year drops finally inject optimism into a market that has felt out of reach for many urban dwellers.

Expect continued renter-friendly conditions, with stable or declining rents, generous incentives, and healthy supply leading the Toronto rental market in the next quarter. Any changes in current trends would need to start with a decline in demand – but that’s unlikely. Population growth in the GTA is largely driven by immigration. Because many newcomers begin their residency as renters, demand is likely to persist as long as people keep coming in.

Market consensus points to a “steady as she goes” conclusion for 2025. High supply, balanced with sustained immigration-driven demand, signals little chance of a sharp market reversal in the immediate future. The Bank of Canada’s stable interest rate policy, now hovering near 3.99%, makes it less lucrative for would-be landlords to cash out and sell, thus keeping more units in the rental pool. Meanwhile, broader economic uncertainty continues to keep many potential homebuyers on the sidelines and in rentals for longer.

Toronto’s rental market in August 2025 marks a rare alignment of healthy supply and slightly softened prices. For the first time in years, renters can pause, evaluate, and even negotiate better terms. The relief is real but should be viewed in light of broader affordability challenges that haven’t gone away. As we look toward fall and year-end, both renters and landlords would do well to stay nimble, watch for changes in supply or migration, and remember that, in a city known for its fast pace, today’s balance may not last forever.

Our top tips for investors are to monitor interest rates, immigration, and supply.

With anticipated lower interest rates near 2.25%–4% by year-end, opening more opportunities for leveraged acquisitions and high immigration (approaching 3 million citywide), keeping rental demand robust, you as an investor can enjoy stable rental yields even if prices soften.

Just avoid overleveraging. Oversupplied segments like condos aren’t the focus right now. It’s time to pivot to value-add strategies in units with higher vacancy or cash-flow potential.

It’s best to target turnkey properties with 2-3 legal rental units (priced in the $1M–$1.2M range), as they remain attractive for steady monthly income. So are neighborhoods with consistent rental demand (e.g., North York, transit-oriented districts, select suburban pockets).

As the Toronto rental market takes a breath of fresh air this August, a new equilibrium of sorts is unfolding – one where renters wield a bit more power, and landlords are reconsidering their negotiation strategies. It’s as if the market hit the pause button, letting the players catch their breath in a game that’s been anything but restful these past few years.