Some considerations when navigating Vancouver's rental market8th March, 2021
The news that B.C. is planning to freeze rents until the end of 2021, combined with a 10 per cent year-over-year decline in the median rental price for one- and two-bedroom Vancouver condos, prompted a listener named Nicole to seek help on how best to navigate the current rental market.
Nicole lives alone but has had roommates in the past, is in her mid-20s and expects to be renting for at least the next 10 years. She is debating between renting a one or two-bedroom condo.
After getting a better understanding of her personality, housing needs and budget, I recommended that she find a two-bedroom condo in her desired neighbourhood. Believing that it’s just a matter of time, possibly later this year, before rents start to increase again.
The current drop in demand for rental properties and resulting drop in rent prices, can be attributed to several factors.
Closed borders mean the usual immigrants, international students, and foreign workers are absent from the current rental pool. Also, as there are fewer tourists, several Airbnbs have pivoted to offering longer term rentals, thereby increasing the supply of rental properties.
While I don’t think there will be a mad rush of people coming to B.C. as soon as the borders open, there will be some pent-up demand, particularly on the international student and immigration front. This extra demand will eventually soak up the excess supply, after which, I expect rents to gradually start increasing.
Another variable that should be considered is the supply of rental units.
Going forward, I believe there will be fewer “mom and pop” type landlords as the hassles of owning a rental property will soon outweigh the benefits. Now that rents are expected to be frozen for the remainder of 2021, after which they will be capped to the rate of inflation, many small landlords will become cash-flow negative. Their revenue is dropping at a time when their expenses (property tax, insurance, strata fees) have never been higher.
As a result of this income vs. expense disparity, I expect that over the next couple of years there will be fewer but larger landlords — which is unfortunate, as it means less competition and housing options for renters.
However, in today’s environment, renters appear to have the upper hand — while still expensive, rents have dropped by 10 per cent since last year, there is a decent amount of supply available with some landlords even offering incentives to fill units.
It didn’t take long before Nicole found a suitable two-bedroom condo.
It is slightly over her budget, so she is planning on getting a roommate to help pay the bills and then, in the future, her boyfriend may move in. I think it’s a great decision as it provides flexibility and cost certainty. Had she rented a one-bedroom condo and compromised on location, eventually she would have had to move again and be subjected to the market conditions at that time — likely having to pay a lot more per square foot.
While I don’t have a crystal ball, my belief is that once the borders open and our world gets back to normal, the extremely low vacancy rates and high rents that Vancouver’s rental market is known for will return.
While the rent caps are a relief for current renters, there is also a downside.
It’s common for long-term renters to experience a large price gap between their current rent and market rents, making it, for many, cost prohibitive to ever move.
Nicole should be able avoid this problem, as she has planned for the long term and found an apartment with a “great” landlord (her words) that she can grow into and remain in for many years.
Originally published in CBC’s Opinion section.