Companies like Equiton have successfully navigated the economic environment of recent years to continue rewarding investors. During this time, issues such as reduced credit availability, lingering uncertainty around cap rates, and high interest rates forced some Canadian real estate companies to put a pause on growth expectations.
Falling interest rates add to market momentum
The Bank of Canada’s interest rate cuts are a major catalyst for the real estate market in 2025. As borrowing costs decrease, investment activity is expected to pick up, especially in multifamily housing, logistics, and industrial sectors. “Cap rates typically trail interest rates by six to eight months,” Lang explains. “In 2024, we saw cap rates rise. Now, with rate cuts taking effect, we expect cap rates to decline as property values and the overall market improve.”
Lang also notes that affordability remains a challenge for homebuyers, even in a lower-rate environment. “Just because rates are cut doesn’t mean everyone can suddenly buy a home. It’s still difficult to get that down payment. That’s why rental demand will remain strong. Our average rent is below the market average due to our portfolio’s gap to market at 35.1% as of the third quarter of 2024. Even if rents decrease, we have room to grow.”
Purpose-built rental housing: A bright spot amid challenges
The upward trajectory of purpose-built rentals is driven by a convergence of factors. Canada’s population growth has accelerated in recent years, fuelled by record immigration levels, putting immense pressure on the housing market. At the same time, much of the country’s rental stock consists of aging buildings that have fallen behind modern standards. Housing affordability has worsened, pushing more Canadians into the rental market as homeownership becomes increasingly out of reach.
Additionally, an aging renter profile and growing preference for urban living have increased demand for well-located, professionally managed accommodations. These dynamics have created a robust foundation for rental housing demand, offering investors a steady stream of opportunities.