Rental Market Report: Vancouver
- „„Vacancy rates edged down from 1.9 in October 2010 to 1.4 per cent inOctober 2011 for purpose-built rental apartments.
- „„The average rate of rent increase between October 2010 and October 2011 was 2.3 per cent, similar to the rate of inflation.
- „„Most of the increase in the stock of rental units was from secondary market rental condominiums.
- Vacancy rates edged down from 2.2 per cent to 0.9 per cent in October 2011 for rental condominium apartments.
- „„Population growth, employment opportunities, and the relative affordability of rental accommodation compared to ownership housing, are expected to support demand for rental housing.
During the past year, a growing population and employment base in the Vancouver Census Metropolitan Area (CMA) helped to lower vacancy rates for both primary and secondary market rentals. With the exception of purpose-built rental townhouses, the average vacancy rate edged lower in October 2011 to 1.4 per cent for purpose-built rental apartments and to 0.9 per cent
for rental condominium apartments. Lower vacancy rates were noted across all bedroom types for rental apartments. The vacancy rate for rental townhouses, which represent a relatively small segment of the rental market in Vancouver CMA, rose to 2.5 per cent in October 2011, from 1.9 per cent in October 2010.
Migration-driven population growth in the Vancouver CMA added new households during the past year, supporting rental housing demand. The flow of international immigrants into the Vancouver CMA between 2006 and 2010 has averaged about
40,000 per year. This results in an estimated 16,000 to 18,000 new households, which are an important source of rental housing demand as new immigrants are less likely to enter homeownership immediately after they land in Canada. In addition,
the age cohort most likely to rent – people aged 20 to 34 years – is expected to remain elevated during the next few years. People in this age group tend to move more often than those in cohorts above 45 years of age.
Employment growth continues to move on an upward trend, however full time youth employment has yet to recover to pre-recessionary levels. Since purpose-built rental remains a cost-efficient housing option compared to the ownership market, the outlook is for continued positive rental housing demand. Vacancy rates for purpose-built rental apartments are expected to remain low.
Vacancy rates were generally lower in and near the city core, where homeownership costs are higher and where employment and educational opportunities are concentrated, attracting demand among renters for rental housing. In the Vancouver
Downtown, the average vacancy rate for purpose-built rental apartments was 0.7 per cent. For the rest of Vancouver City, vacancy rates were mostly below the 1.0 per cent mark. Areas just outside the city core, such as North Vancouver and Richmond, reported vacancy rates 1.1 per cent or lower. In contrast, Port Moody, Port Coquitlam, and Coquitlam, where
home prices are relatively lower, recorded average vacancy rates of 3.0 per cent for purpose-built rental units. Likewise, Surrey and Burnaby reported average vacancy rates of 3.7 and 2.0 per cent respectively. A similar pattern was observed for rental condominium apartments.
Generally, lower vacancy rates for rental units in larger structures suggest that consumers prefer these to smaller structures. Larger rental structures are more likely than smaller buildings to have amenities such as recreation and exercise facilities, as
well as parking and on-site laundry.
The average vacancy rate for purposebuilt rental units in a structure with six to 19 units was 1.3 per cent in the Vancouver CMA, compared to 0.7 per cent for rentals in structures with more than 200 units. A similar pattern was also observed for rental condominium apartments.
Rental Availability Rates Move Lower
Moderate rent increases as well as a slowdown in the shift to homeownership have lowered rental availability rates for purpose-built rental units. A rental unit is considered available if the existing tenant has given, or has received, notice to move, and a new tenant has not signed a lease; or the unit is vacant. Since home prices in most areas of the Vancouver
CMA have risen, the flow of first-time buyers entering homeownership has decreased compared to the last few years. The gap between the apartment vacancy rate and the availability rate was relatively unchanged in October 2011, compared to one year ago, suggesting stable turnover in the rental market.
Average Rents Keep Pace with Inflation
A balance between increased demand for rental housing and a larger stock of rental units kept the pace of average rent increase near the rate of inflation. Although there has been strong demand for rental accommodation in the Vancouver CMA, the number of rental units, particularly rental condominium apartments, has also increased over the past year. There has also been an increase in the number of accessory rental suites, such as laneway homes and basement suites, and purposebuilt
rentals. All this has contributed to a slower pace of growth in same sample rents this year compared to 2010. The average rate of rent increase for purpose-built rentals in the Vancouver CMA was 2.2 per cent, which is comparable to the rate of
inflation at 2.3 per cent. Rents have grown at a slower pace for four consecutive years
Given the higher renter demand for housing within the city core, purposebuilt rental units in these areas were able to achieve slightly stronger rental rate growth. Average rents in the City of Vancouver rose 2.8 per in from 2010 levels. On the other hand, Burnaby, Richmond, and Surrey all recorded growth rates in average rents at levels lower than inflation.
Reflecting the lower vacancy rates reported for larger rental structures, average rents in these structures were generally higher than for those in smaller buildings. The average rent for a purpose-built rental unit in a six to
19 unit building was $984. For units in buildings with more than 200 units, however, the average rent was $1,208.
Rental condominium apartments generally obtained a higher rental rate than purpose-built rental units, but the increase in supply of such units will likely keep future rent increases moderate. Compared to most purpose-built rental apartments, rental
condominiums tend to be newer and have more housing services such as in-suite laundry, higher-end appliances and floor finishes, and onsite recreation and exercise facilities. As such, average rents for rental condominiums were approximately
20 to 30 per cent higher than those for purpose-built rentals. Still, due to supply-side pressures, this represents a drop in rent premium over purposebuilt rental units compared to last year when rental condominium apartments achieved a premium of
45 to 60 per cent. Many households can choose either the cost efficient purpose-built rental market or home ownership. Rental condominiums face higher potential renter substitution from either of these two options. Since rental contracts are typically for one year, there is generally one opportunity each year for a renter to move if rent were perceived to be too high or homeownership offered strong value.
Rental Market to Remain Stable
The Vancouver rental market is forecast to remain stable next year. People moving to the region, the aging of the population, and general economic and housing conditions are expected to support rental housing demand. Rental vacancy rates are forecast to remain low. However, due to a larger pool of secondary market rental units, the average rate of rent increase is expected to remain in line with the rate of inflation.
Rental Affordability Indicator Lower
CMHC produces a local rental affordability indicator to gauge how affordable a rental market is for those households which rent within that market. A generally accepted rule of thumb for affordability is that a household should spend less than 30 per cent of its gross income on housing. This indicator examines a three-year moving average of median income of renter households and compares it to the median rent for a two-bedroom apartment in the centre in which they live. Because of data availability,
the income is forecast for the two most recent years which explains estimated data for the year 2010. A three-year moving average is used to remove year-to-year volatility. An indicator value of 100 indicates that 30 per cent of the median income
of renter households is necessary to rent a two-bedroom apartment going at the median rent. As the rental affordability indicator increases, the market becomes more affordable; as the indicator declines, the market becomes less affordable.
Between 2010 and 2011, the affordability indicator fell to 83 from 86 for the Vancouver CMA.
CMHC: Complete Rental Market Report