Metro region’s vacancy rate remains tight, rents soaring

Pressure still high on tenants despite construction of hundreds of new units

Metro Vancouver’s rental vacancy rate edged up slightly in 2018, but it wasn’t enough to keep average rents from soaring 6.2 per cent, the Canada Mortgage and Housing Corp. said Wednesday.

Some 793 new purpose-built rental apartments were added in Metro in 2018, enough to help increase the overall vacancy rate by a slim 0.1 of a percentage point to one per cent.

However, after five consecutive years at or below one per cent vacancy, with increasing employment in Metro and many young buyers priced out of home ownership, CMHC analyst Eric Bond said the pressure on rents remains high.

“It is really only in the last three years that we’ve seen substantial new supply added to the purpose-built rental market for the first time in decades,” said Bond, CMHC’s principal analyst for Vancouver.

And even with about 8,000 new rental units under construction, Bond said the housing agency’s outlook is for the vacancy rate to increase to only 1.3 per cent in the next couple of years. “The market remains tight,” Bond said.

Surrey had the lowest vacancy rate at 0.4 per cent, and the District of North Vancouver had the highest vacancy rate at 1.7 per cent, according to the report, which is based on an annual survey. The City of Vancouver’s vacancy rate was below the regional average at 0.8 per cent with lows of 0.2 per cent in south Vancouver and a high of 1.2 per cent downtown.

The result is that, for the fourth year, rents have risen more than the provincially allowable increase, indicating that landlords have been able to charge rents during turnover that were much higher than previous rents.

The turnover rate of rental properties remained stable in 2018 with 14 per cent of units changing tenants, Bond said.

The survey found a considerable difference between rents that tenants pay in occupied units and the rents landlords are asking for vacant units.

The average rent in October for a two-bedroom apartment was $1,649 a month across Metro Vancouver.

But in the city of Vancouver, the average rent for a two-bedroom apartment was $1,960 a month, and landlords were asking $2,593 from new move-ins. That’s a gap of 32 per cent, the biggest differential among five selected municipalities.

For all apartment sizes across Metro Vancouver, the average asking rent for vacant units in October was 14-per-cent higher at $1,578 a month than the average rent of $1,383 for existing tenants. “It depends on when a unit first turned over, but the increase a landlord can achieve is, in some cases, several hundred dollars,” Bond said.

The 793 new units were not evenly distributed.

The city of Vancouver got 571 new units, while the Tri-Cities had a net loss of 339 purpose-built rental apartments, while Burnaby had a net loss of 177 units as the result of renovations and demolitions.

And although the province and municipalities have introduced tax measures aimed at increasing the number of investor-held properties made available for long-term rent, the CMHC’s report found that there were 1,081 fewer condominiums available for rent in Metro Vancouver than in October of last year.

That might be because some investor-owners took advantage of steep price increases for condominiums to sell their units, which took them off the market, Bond said.

For other investors, Bond said it might have been more attractive to convert units to short-term rental units, such as through Airbnb, though CMHC doesn’t have data on that.

Across Canada, demand for rental housing continued to outpace supply, ratcheting the national vacancy rate down to 2.4 per cent in October 2018 from three per cent in the same month a year ago.