One of Canada’s biggest drivers of inflation is overstated, according to a Big Six bank. A new report from CIBC Economics warns investors that official CPI rent inflation overstates growth. This implies the Bank of Canada (BoC) may be keeping rates higher than needed. It’s a disturbing argument with one problem: It’s not clear if CIBC understands what CPI actually measures. 

Canadian Rents Are Overstating Inflation, Argues CIBC

Canadian rents are soaring—and falling—depending on which agency you ask, according to CIBC. CPI shows annual growth of rent hitting 5.2% in October, while they highlight CMHC’s reported asking rents are down 3% from last year. 

“We believe that official CPI rent inflation data is overstating actual rent inflation in the economy as a whole,” explains CIBC Deputy Chief Economist Benjamin Tal.  

Tal believes this discrepancy comes down to incentives (or the lack of factoring them into CPI). In recent years, some rentals have been throwing in freebies with the lease, such as a free month or including utilities. It’s a problem he warns has become common in BC and Ontario, now spreading to regions like Atlantic Canada. A problem the bank sees continuing through 2026 due to soaring condo inventory, slowing population growth, and a rental construction boom. 

CIBC Logic Supported Equally By Comparing CPI Rent To Dinosaurs

CIBC hints at the monetary policy implications: if rent—a primary driver of inflation—is overstated, CPI as a whole is overstated. The logic holds, but the premise is flawed. Concluding that CPI’s rental growth is wrong because it differs from asking rents, is like saying the thermometer is broken because it doesn’t match the weather forecast.

StatCan’s CPI rent measure isn’t based on asking rents, but on “contractual rents actually paid by sitting tenants.” It adjusts for quality, size, and services, and excludes subsidized or institutional units. It also includes both new and existing tenants, and the latter is a real doozie. Rental renewals vary widely across the country due to uneven limits on hikes. Despite CPI rent reported at 5% nationally, it varies widely with provinces like Ontario (+4.5%) seeing half the growth of Quebec (+9.7%). CPI is an attempt to measure the change in the cost of living, and currency decay (normies call it inflation). It’s not trying to measure property marketing.  

Rental Asking Prices Useful For Understanding Price Discovery

CMHC’s asking rental data is important for understanding a totally different trend—price discovery. This is more about understanding the expectations of landlords, as they’re set by both their “hopes and dreams” and the reality of carrying costs on a vacant unit. However, confusing what landlords want (asking rents) with what people pay (CPI) amplifies a problematic feedback loop.  

Measures of asking prices contribute to a monetary policy problem known as unanchored inflation expectations. People hear that prices are rising, then expect it as an inevitability. This is further amplified when the data comes in higher, driving expectations higher. It’s a problem the Bank of Canada has repeatedly flagged, specifically warning that elevated expectations help price setting. 

Canadian Rental Inflation Still Growing At Destabilizing Speeds 

CPI Rent Annual Growth. 

Source: StatCan; Better Dwelling. 

Those expectations aren’t unlimited. Once a market becomes saturated, it creates a spillover effect that cascades into more affordable markets. The spillover effect is still sending rents in some cities up to 14% higher, despite 2025 quarterly population numbers showing a decline.

The use of asking prices for rents is an odd move in Canada. The real estate industry looks for price validation—how much a home sold for. Disregarding sales (demand) in the context of supply and factoring in those $1 listings is universally accepted as not helpful. Using asking prices for real estate typically only occurs in developing countries that lack an MLS. Somehow, Canada’s rental market lives and breathes on it, setting landlord expectations that are leaving investors stuck with negative cashflow “investment” properties.

We need to stick to the reality of paid rents (CPI) rather than the unvalidated vibes of asking prices. We tried ignoring inflation data back in 2021, and no one is a fan of debt costs rising 19x in less than two years to counter that mistake. 

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