Rental vacancies ease slightly, rents higher

Greater Victoria’s tight rental vacancy rate has eased slightly in the past year while the average rent climbed by 7.5 per cent.

The overall vacancy rate in the capital region is now at 1.2 per cent, up from 0.7 per cent a year ago, Canada Mortgage and Housing Corp. said in its latest rental market report released Wednesday.

The new report indicates that despite more units on the market, it will still be challenging to find a place to live and rents are getting more expensive.

The region has a total of 26,371 rental apartment and townhouse units, up from 25,580 a year ago. The majority are rental apartments.

In October 2017, the average apartment rent was $1,072. It has now risen to $1,170, the federal agency said. A renter of an average two-bedroom pays $1,406 now, compared with $1,288 a year ago, the report said.

Rents reflect the total rental market supply, which is made up of new units and those in older, modest buildings. An online review of available rental units in the capital region show that many surpass those numbers.

CMHC said the increase it found in rental rates is likely due in part to more units turning over as longterm tenants move out of their apartments. “The turnover in Metro Victoria was 18.1 per cent in 2018, exposing roughly one in five units to current market-rental prices.”

Over a period of years, the capital region has seen a shift in demand from home ownership to rental, the report said.

The purpose-built rental universe has been slow to respond, the report said, leading to several years of undersupply relative to demand, and a low vacancy rate.

Developers spotted an opportunity in the market and have been launching rental projects in recent years, often large apartment buildings with long construction times. It’s not unusual to see a major project take up to two years to complete, especially at a time of rising construction costs and a shortage of labour.

This month, CMHC said that the rate of construction for new rental units, over a multi-year period, is the highest experienced in the region since the 1970s.

In the meantime, the region has seen the loss of older apartment buildings that had offered lower rents. As well, strong housing prices have led owners of rental homes to sell them, eliminating more rental opportunities from the pool. Most new households are choosing to rent rather than buy, CMHC said.

Housing prices are strong in the capital region compared with other parts of the country. The benchmark price for a condominium last month in Victoria’s core was $502,600, and a single-family house was $881,000, according to the Victoria Real Estate Board. The core is made up of Oak Bay, Victoria, Saanich, Esquimalt and View Royal.

Population growth, while continuing, peaked in 2016 and has slowed, CMHC said.

Rental vacancies vary throughout the region.

While the vacancy rate in James Bay is 0.5 per cent, it’s 2.2 per cent in Oak Bay.

David Hutniak, chief executive of LandlordBC representing owners and managers of rental properties, said that in terms of the broader sector, “there is definitely quite a bit of uncertainty right now legislatively.”

He pointed to such moves as the provincial decision in the fall to pull back the maximum allowable rent increase, and calls for vacancy control, which would tie rent to a unit as opposed to the current situation that ties it to a tenant.

Limiting revenue to landlords could lead to less investment in buildings, he said. “You’ve got to cut costs. That’s the only way that you can operate when your revenue is further squeezed.”