Economic uncertainty and tariffs weigh on Q1 2025 activity
Investment activity in Canada’s major multifamily rental markets showed notable year-over-year improvement in 2024, driven by falling interest rates and renewed investor appetite.
However, that momentum was disrupted in Q1 2025, as investor confidence cooled due to growing economic uncertainty, primarily linked to volatile US tariff policies, according to Avison Young’s latest national multi-residential report.
“We saw a surge in investment activity in Canada’s major markets when comparing annual results for 2024 to 2023, but we didn’t sustain these high levels in Q1 2025 as investors took precautions against higher economic risks stemming from volatility around tariffs,” said Marie-France Benoit, principal and director of market intelligence at Avison Young Canada.
Montreal led the country in Q1 2025 investment volume, followed closely by Edmonton, which also posted one of the few rent growth increases among Canadian cities.
Rents are flat or declining in most markets, with Edmonton and Ottawa being the exceptions.
While transaction volume fell in Q1 2025, the average price per unit declined only modestly, stabilizing around $300,000, down from the 2023 peak of $422,000. Avison Young noted that investor caution reflected broader macroeconomic concerns, including the impact of tariffs on capital flows and the potential for higher yields as markets price in greater risk.
Inflation excluding shelter has stayed within the Bank of Canada’s 1% to 3% target since May 2023. However, the BoC has flagged tariffs as a major threat to economic stability, which has influenced its policy stance and contributed to rising investor risk aversion in the real estate sector.
Canada’s rapid population growth, which peaked in Q2 2024, has also begun to slow. Notably, net migration is declining, and the number of non-permanent residents, including students and temporary workers, has recently dropped for the first time since 2021, signaling a shift in federal immigration policy.
Alberta saw the strongest population growth at 3.5%, driven by interprovincial migration, especially from Ontario and British Columbia, while other provinces fell below 2%.
Foreign investor activity in Canadian multifamily markets has also receded. Sales volumes linked to foreign buyers have steadily decreased since their peaks in 2021–2022, and recent foreign purchases have been sporadic.
Purpose-built rental demand
Despite the temporary slowdown in activity, purpose-built rental properties continue to attract investor interest. Avison Young said the sector is a relatively “safe haven,” offering positive, stable cash flow from day one, and presenting long-term upside potential for rental growth.
“With economic fluctuations, the multifamily sector remains a safe haven among investors, yielding positive, stable cash flows,” Benoit said.
Investors remain particularly active on transactions under $20 million, where private capital and lenders are showing strong appetite. The current interest rate environment also allows for favorable financing spreads, further supporting deal flow in this segment.
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Meanwhile, luxury rental housing is facing more pressure. Avison Young’s cap rate survey indicates a steeper decline in fundamentals and sentiment for this segment. Elevated vacancies, declining rents, and affordability pressures from 2022 to 2024 have made higher-end units more vulnerable.
More investors are avoiding this space in favour of “recession-proof” multifamily properties that offer more affordable rents and reduce the risk of tenant arrears or long-term vacancies.
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