Vancouver BC’s Rental Market Stressed Out

You wouldn’t think a Canadian city could have the high rents we’ve seen in most US cities, yet Vancouver is one city with high demand and lack of supply has lead to high apartment rental prices.  On the other side of Canada the Toronto rental market is suppressed by similar conditions.

Vancouver is rated as one of the most livable and beautiful cities in the world. Along with its positive economy, the city has attracted hundreds of thousands of new residents.

Should you invest in rental property in Vancouver BC? Is it a good place to launch a property management company? It is a mecca for residential rental property management, yet it’s a tough environment for property investors. Investors might be better off in the less regulated US rental market.

Gridlock in Housing Development Against Big Demand

Both of Canada’s most populous cities have unique geographies, economies, political influences, and housing development laws. These lend themselves to severe housing shortages, high rents and rent controls that only prolong the issue. It’s not a comfortable mix for anyone.

And this has been during years where immigration is high and Millennial-aged Canadians are wanting to form families and buy homes. That spells high rents, even though the Greater Vancouver Real Estate Board reports rents have fallen 3.1% over the last 3 months.

Screen Capture courtesy of Padmapper.com

Less Positive Environment for Investment

Both Vancouver and Toronto have passed anti-foreign investment, severe mortgage qualification rules, rent controls, and raised taxes to attempt to ease home prices and rental prices. Rising mortgage rates sour the picture further.

Foreign buyers have been passing on buying Vancouver properties and instead are buying in Seattle. However, Seattle’s downtown vacancy rates have shot upward. In Vancouver, vacancy rates remain below 1%.

Low inventory in virtually every market combined with cap rate compression over the past few years leads to a province-wide average cap rate of 4.22%…Vancouver leads the charge with an average asking cap rate of 2.37% this week. — from Multifamily.ca report

Despite this, developers continued developing multifamily buildings including low rise developments and high rise condo towers. People warned of a glut, yet these condos were quickly bought and shortages are still evident.

Affordability and Eviction

The cost of living in Vancouver is ranked 101st out of 444 cities worldwide, and 2nd highest in Canada with COL index of 71.6. Availability of homes in Vancouver has increased since summer 2018, however prices haven’t fallen as expected. For property managers, landlords, and investors, it raises the much loathed matter of eviction in the lower tier market with its cost and emotional fallout. Even in the mid to upper tiers, any upset to the Canadian/US trade agreement could create eviction problems for landlords and rental property owners.

For 1 bedroom apartments, Vancouver is the the second priciest Canadian city with rents up 2.5% to $2,050 ($US 1578) and two bedrooms now at to $3,230 ($US 2486) per month (numbers from Padmapper). Compare them to US apartment rentals prices.

Vancouver: Not so Inviting to Property Investors

Does Vancouver’s negative political environment, low cap rates, and rent controls make it the most uninviting place for property investors? With global rental markets receding, Vancouver’s property market may still be seen as a safe haven for nervous foreign investors looking to park their money in rental income property.

If you’re hoping to buy to flip however, the numbers are very poor. In fact, flippers were blamed for rising prices in Vancouver but that’s been recently debunked to show flipping wasn’t a factor.

Strong demand accompanied by even stronger pricing and highly compressed cap rates have convinced many long-term holders of multi-family properties in Metro Vancouver to cash out in the first half of 2017 amid a rising interest rate and bond yield environment that could move the market into a post-peak-pricing phase — report from Avison Young.

Vancouver likely isn’t one of the best cities to buy rental property.  Even with rents falling, prices are high and the political environment is not conducive, and rent controls make it comparatively awful for investors. That doesn’t mean investment opportunities don’t exist. For property management firms who progress to manage properties more efficiently, the land of rental condos might be more lucrative than many other cities.

Looking to improve your rental property ROI, utilize software automation to streamline your operations. Take a good look at one versatile new Proptech startup: ManageCasa. With so many features, it’s worth switching to.

See also: Property Management Application | Cloud Property Management | Proptech Startups | Property Management Companies | Multifamily Property Investment | Multifamily Market Update | Apartment Management Software | Apartment Rent Prices | Apartment Construction | Apartment Demand USA | Furnished Apartments |  Property Management Apps |   Apartments for Rent | Renters Insurance | Rental Housing Market | Apartment Rent Prices USA