As the Vancouver real estate market – and the broader Canadian housing sector – go into overdrive, many industry observers are forgetting about a key segment of the market: rentals. With housing prices skyrocketing, sales activity hitting record levels, and financial analysts debating if this entire cycle is a giant bubble, the metro Vancouver rental market is not generating nearly as much attention.
But the trends occurring in the rental portion of the Vancouver real estate market should turn some heads. Unlike its metropolitan counterparts, Vancouver has witnessed an interesting development in its rental market. While vacancy rates have gone up, prices have also surged.
So, what exactly is happening in the Metro Vancouver rental market?
2019 vs. 2020: Now and Then
Before the coronavirus pandemic, rental prices had been going through the roof, in Vancouver as well as other urban hubs in Canada. The average rent for an unfurnished one-bedroom apartment topped $2,000. By December 2020, the average price tumbled 4.4 per cent to $1,855 per month. Despite the modest decline, Vancouver continues to possess one of the highest average monthly rents in the Great White North, even though the vacancy rate rose 2.6 per cent last year, according to the Canada Mortgage and Housing Corporation (CMHC).
Back then, the same old story was mirrored across other major urban centres: supply was tight, demand was fierce, and short-term rentals dominated the market. This resulted in bidding wars, long lineups, sky-high deposits, and other facets of an expensive market. Today? Inventories are limited, the demand is still there, and Airbnb units remain prevalent, although they have faced criticism for violating public health guidelines. This time, the key difference appears to be government intervention.
In March 2020, British Columbia’s New Democratic Party (NDP) government introduced rent freezes in response to the coronavirus-induced financial crisis. The rent freeze is scheduled to expire in July, but the government has tabled legislation to expand the measure until December.
As provincial policymakers offer tenants support in the form of rent freezes, available rental spaces are being squeezed out of the market. This spawned concerns that broader housing supplies could contract or become more expensive for new renters. According to an Insights West survey, a growing number of landlords are choosing to sit on the sidelines and wait until conditions normalise before submitting listings again. Many of them do not think it is worth the hassle to start renting out now, says Steve Mossop, president of Insights West.
“You look at the 12 per cent of adults in B.C. who count themselves as a landlord, there’s a further nine per cent who own a property that’s suitable for renting that’s not being rented out,” he told NEWS 1130. “But the other 30 per cent say that the single attributable reason is rent controls and rent freezes. So, this particular piece of legislation is perhaps adding to the limited supply that’s already out there.”
Other property owners are starting to raise rents, which has been complemented by incentives, such as one-month free rent or move-in bonuses. Overall, it continues to be a challenging market to navigate.
And this is not only the case in Vancouver. The same developments are being seen in Victoria, where the rental market grew more expensive in 2020, says the CMHC. Last year, the average cost of renting an apartment in the Greater Victoria Area jumped by 3.3 per cent to $1,275, which was “faster than inflation and the provincially allowable rent increase, resulting in a $356 premium of asking rent for vacant units compared to rent for occupied units.” Like Vancouver, the municipality’s vacancy rate increased to 2.2 per cent.
What do the industry experts anticipate for 2021?
Good News Ahead for the Metro Vancouver Rental Market?
Will students – domestic and foreign – return to the classroom? Will young people find jobs again? When will the government ease restrictions and relief measures? These are the questions that landlords are asking in 2021. But until they receive answers, some changes are going to be made to adapt.
As has been seen over the last year, landlords and developers could establish higher prices for new leases. Since they cannot raise the rent for current tenants, they might have an increased benchmark for newer tenants, making future rent increases higher.
Industry observers think that more landlords might transition to metered utility costs instead of a flat rate in the rent. While this has been the norm in Toronto, many apartment buildings in Vancouver have not adopted this system. By introducing this pricing mechanism, landlords can shift more operating costs onto the renter.
Like the homebuying market, the rental market in Vancouver and nation-wide, might have more virtual showings and digital documents to rent out spaces.
The coronavirus pandemic may have ushered in some changes to the Vancouver real estate market, whether buying a home, selling a condominium, or renting an apartment. It is unclear when the economy will return to normal. Until it does, landlords and renters must be prepared for whatever unfolds in the current marketplace in a post-pandemic Canada!