Folks, what’s the future of rental rates when you have 100,000 people moving to BC each year?
For possible answers, let’s look to the recent past:
Rental rates for one-bedrooms in Vancouver averaged $1900/month in February of 2017. Fast forward to today and the average for a one-bedroom just clipped $3,000/month. That’s a 63% increase in 6 years. Ouch!
That said, you can get into an older purpose-built rental in the West End, for example, for much less than $3000/month. When I first came to Vancouver I sought out the older stock, because I liked the affordability (lower payments) and the security. You can’t get booted out by an unscrupulous landlord moving in his “mother” for a few months or doing a phantom renovation, like swapping in a new stove.
If you believe Brendon Ogmundson, the Chief Economist at the REBGV, BC will be short a whopping 900,000 homes by 2030 if current growth trends continue.
Let me paint the picture for you: A while back, I was walking down Burrard Street with my future wife. We past a group of two dozen people outside the Electra (the old BC Hydro building) at the corner of Burrard and Nelson.
I thought they were celebrity hounds waiting for a movie star. When I approached one and asked what was up, she said that they were waiting to view the rental unit. That was 2015. I told my wife to expect rental rates to skyrocket when you have groups of 40 to 50 people viewing one rental unit in an old building like the Electra (with no parking available).
Today, I see this pattern repeat itself with my investor-clients. I had one who listed his one-bedroom for rent near King George. No sooner did he have his ads up on Facebook Marketplace and Craigslist and his inbox was flooded with 40 inquiries in two days.
CMHC (Canada Mortgage Housing Corporation), an arm of the federal government, suggests BC is short 610,000 homes. And with our population growing at 100,000 per year, the gap widens.
The most new homes finished in a single year was 42,000 in 1993. BC averages 30,000 newly constructed per year.
That’s still 70,000 too few to meet the needs of a growing population. Hence, you get a shortfall of 900,000 homes by 2030.
So get ready for lineups outside rental listings!
I’ve even had online leads call me asking for help. My advice for rental seekers is to dress like you’re going for a job interview, bring your references with you, and don’t negotiate with the landlord to reduce the rent if there’s a line up of people behind you.
If we see a repeat of the last six years of increases, then one-bedrooms would reach nosebleed levels of $4500 per month by 2030. And if you don’t think that can happen, study other big markets like Manhattan where the one-bedroom rents average $4800/month CAD.