For the last several months, much of the buzz in the Vancouver real estate market has surrounded the strong revival in housing prices. In September alone, home sales in the Greater Vancouver Area surged 56.2 per cent, prices advanced 5.8 per cent year-over-year to $1.041 million, and new listing activity reached record levels. Despite the coronavirus pandemic and a national economic downturn, one of the country’s biggest housing markets continues to grow, and the forecasts suggest even stronger conditions in 2021.
Canada’s red-hot housing sector is helping cushion the economic blows in the aftermath of the virus outbreak. But the rental market in Vancouver – and many other major Canadian areas – has been just as much of a compelling story in the broader Canadian real estate market this year. While the COVID-19 discount for houses and condominiums appeared to be temporary in a market like Vancouver, monthly rents have continued to trend downward throughout 2020. This has given tenants some relief and leverage after years of facing double-digit growth in rent.
Does the recent shift spell trouble for property owners and landlords who have taken advantage of sliding vacancy rates and skyrocketing rents? If so, will the rental market return to pre-pandemic levels? Below we take a deep dive into the trends in the Vancouver rental market and share our projections for the year ahead.
Rental Inventory Continues to Climb in Vancouver Real Estate Market
Before the COVID-19 public health crisis, the vacancy rate for an apartment in Vancouver was in the single digits. In the most extreme of circumstances, there were bidding wars for rental units in the heart of Metro Vancouver. The demand was fierce, allowing landlords to dramatically increase prices. Today, listings have increased, leases are up, and rents are down.
RBC Economics released a new and bleak report that assessed the overall Vancouver real estate market. The report noted that the asking price for a one-bedroom apartment in downtown Vancouver tumbled 7.3 per cent year-over-year in October.
RBC senior economist Robert Hogue stated in the October report that there are several factors contributing to the changes hitting the Vancouver housing market. The chief aspect? Immigration. A decline in nationwide immigration flows has been one of the chief factors in the newest trends unfolding in Vancouver, the report stated. In the second quarter of 2020, migration to Canada collapsed at an annualised rate of 94 per cent to just 9,700 individuals. In the first quarter, more than 70,000 people were welcomed across our national borders. British Columbia immigration numbers slipped into negative territory in the first half of 2020, cratering more than 100 per cent from the same time a year ago.
When immigration levels return to normal in the coming year or two, the Vancouver rental market could stabilise. That said, it could take time for the rental market to return to pre-pandemic levels.
Rental demand near post-secondary institutions is another hot topic among market. With more colleges and universities transitioning to online studies and the federal government shutting the border and keeping foreign students abroad, attendance in classrooms – and thus demand for student housing – has plummeted.
The decline in short-term rentals – which has become a common trend within many urban markets country-wide – and the rise of new purpose-built rental and condo units across Vancouver, have also sent rents lower this year.
“The sheer economic shock of COVID-19 — with unemployment soaring to unprecedented highs — directly impacted many Canadians and put many others on the defensive. Almost 780,000 people opted to defer mortgage payments since the start of the pandemic, representing 16% of mortgages in bank portfolios. By the end of August, the vast majority of mortgage holders whose deferral period has expired had resumed regular payments,” the report stated. “However, it remains unclear how many will ultimately be able to continue as outlook for jobs remains bleak for many Canadians. This poses a risk for the housing market, especially in areas where the economy is shakiest.”
According to the Canada Mortgage and Housing Corporation (CMHC), the sharp rise in vacancies will continue, citing immigration and online classes. At the same time, however, some experts are warning that the coronavirus-induced relief in the rental market could trigger an influx of new renters since prices are more attractive.
Will 2021 Be a Repeat of 2020?
What a difference a year can make. Twelve months ago, prospective tenants were lucky to find a one-bedroom apartment in Vancouver for $1,600. Fast forward to the present, and renters are securing discounts, benefits, and more options. Is this the new normal that everyone keeps talking about?
While these trends will not last forever, there may be no better time than the present to either find a new apartment or renegotiate your lease with your landlord. Eventually, immigration levels will normalise, students will return to the classroom, the economy will bounce back, and this highly infectious respiratory illness will become a mere blip in our collective history. Until then, if you had your eye upon the communities of Kitsilano, Lower Lonsdale, or Yaletown, now might be the time to pull the trigger and start searching for your dream rental!