Ontario Real Estate Investment Outlook 2025

For real estate investors in Ontario, 2025 presents a dramatically different landscape than recent years. According to the 2025 Canada Rental Market Trend Report by Liv Rent, Ontario’s average monthly rent for unfurnished one-bedroom units stands at $1,939, representing a mere 0.99% year-over-year increase—a sharp decline from 2023’s robust 13.05% growth.

This rental stagnation signals important shifts that investors need to understand to position their portfolios effectively in the coming year.

Key Factors Driving Ontario’s Rental Market Shift

Record-High Emigration

Perhaps the most surprising statistic affecting Ontario’s rental market is the unprecedented level of emigration. The province experienced its highest emigration levels since 2011, with 39,430 people leaving in 2024 alone. Ontario now accounts for 48% of all departures from Canada, creating a significant demographic headwind for rental demand.

Exodus of Non-Permanent Residents

Adding to this pressure, 2024 saw a dramatic 66.52% increase in non-permanent residents leaving Ontario compared to 2023—the highest departure volume of this population segment in Canada. This exodus of young professionals, students, and temporary workers who typically fuel rental demand is creating notable vacancies in previously tight markets.

Housing Construction Slowdown

While population pressures ease, supply dynamics are also shifting. Housing construction has declined across all metrics:

• Housing starts down 25% (with apartment construction declining 27%)
• In-progress construction down 5%
• Completions down 9%

This construction slowdown may help stabilize the market in the medium term by preventing oversupply during this period of reduced demand.

The Landlord-Tenant Disconnect: What Investors Need to Know

The report’s survey of over 350 landlords and tenants reveals critical insights that help explain current market dynamics:

Profitability Challenges

Contrary to tenant perceptions, most landlords are struggling with profitability:

• 66% of landlords report either taking a loss (33%) or merely breaking even (33%)
• Only 2% of landlords report making “significant profit”
• 31% are making moderate profit
• 45% of landlords say their rental income doesn’t cover property expenses

Meanwhile, 57% of renters believe landlords are making “substantial profit” from the current rental market, highlighting a significant perception gap that affects market dynamics and policy discussions.

Demand Mismatch Reality

The survey exposes a surprising disconnect between perceived and actual rental demand:

• 67% of renters report the market as “extremely competitive” with difficulty securing housing
• Yet 26% of landlords are experiencing “very few applications” and insufficient demand
• Another 36% of landlords report “some applications, but not as much as expected”
• Only 10% of landlords report “high demand, plenty of applications”

This mismatch suggests Ontario’s rental market may be softening faster than publicly acknowledged, creating both challenges and opportunities for investors who understand the true state of demand.

Financial Pressure on Landlords

The survey reveals that nearly half (45%) of landlords feel current rental income is “lower than preferred, not covering all expenses.” This financial squeeze on property owners may eventually force rental inventory adjustments through sales or consolidation, potentially creating acquisition opportunities for well-capitalized investors.

Regional Bright Spots for Investors

Despite the broader downward trend, several Ontario markets show promising counter-trends that savvy investors should monitor:

Construction Growth Cities

Several cities defied the provincial construction slowdown, posting significant increases in housing starts:

• Burlington: +227%
• London: +101%
• Markham: +59%
• Mississauga: +27%
• Vaughan-Richmond Hill: +18%

These areas are positioning themselves for future growth and may represent strategic investment opportunities as they enhance their housing stock to meet future demand.

Toronto: A Market in Transition

Toronto’s rental market has entered a correction phase. Rent prices began dropping in July 2024, coinciding with a 9% quarter-over-quarter jump in emigration from Ontario. Year-over-year declines were seen across all unit types:

• Furnished one-bedroom: -8.33%
• Furnished two-bedroom: -12%
• Furnished three-bedroom: -15.8%
• Unfurnished one-bedroom: -0.7%
• Unfurnished two-bedroom: -1.6%
• Unfurnished three-bedroom: -3.6%

Within Toronto, East York led with the steepest year-over-year rent drops for furnished rentals, while Downtown saw the largest declines for unfurnished units. This suggests a recalibration in traditionally strong rental districts.

Strategic Considerations for Ontario Investors

Focus on Operating Efficiency

With two-thirds of landlords reporting no profit, successful investors must prioritize operational efficiency. The gap between tenant perceptions (57% believe landlords make substantial profits) and reality creates opportunities for investors who can optimize operations where others cannot.

Reconsider Marketing Strategies

The survey shows 53% of both landlords and tenants rely on rental platforms, while 36% of landlords use social media (compared to 31% of renters). In a softening market with landlords reporting fewer applications than expected, effective marketing becomes increasingly important. Investors should consider diversifying their listing strategies beyond traditional platforms.

Target Areas With True Demand

The significant disconnect between landlord and tenant perceptions of market competition suggests demand varies dramatically by location and property type. Investors should conduct granular market research rather than relying on general market narratives that may overstate actual demand.

Consider Value-Add Opportunities

With rental growth slowing, investors may need to shift from appreciation-focused strategies to value-add approaches. Properties requiring renovations or operational improvements offer better opportunities to enhance returns in a flat market.

Explore Secondary Markets

The Niagara region’s outperformance highlights the potential of secondary markets. With Ontario’s most expensive cities (Markham at $2,369, Mississauga at $2,279, and Toronto at $2,235) showing weakness, more affordable markets like St. Catharine’s ($1,602), London ($1,628), and Niagara Falls ($1,634) may offer better growth potential.

Monitor Remote Work Trends

The report predicts that declining remote work arrangements will revitalize downtown cores, potentially slowing rental price declines in major urban centers. Investors should closely monitor this trend, as it could signal a reversal in the post-pandemic shift away from city centers.

Looking Forward: What to Expect in 2025-2026

The report forecasts continued moderate downward adjustment in rental prices across Ontario. Contributing factors include:

• Anticipated decrease in immigration
• Increase in first-time homebuyers reducing rental demand
• Completion of new rental units expanding supply
• Potentially higher vacancy rates

However, several external factors could influence this trajectory, including the federal election, interest rates, evolving immigration policies, U.S. tariffs, and broader economic conditions.

Adapting to a New Normal

For Ontario real estate investors, 2025 marks a pivotal transition period requiring strategic adaptation. The era of rapid rental growth and appreciation appears to be pausing, necessitating more sophisticated investment approaches focused on operational excellence, regional selectivity, and value creation.

The significant disconnect between landlord experiences and tenant perceptions reveals both challenges and opportunities. Those who can navigate this changing landscape—identifying pockets of growth like Niagara Falls while optimizing existing holdings for cash flow rather than appreciation—will be best positioned to thrive in Ontario’s evolving rental market.