Current rate of construction could fill Metro Vancouver rental gaps: RBC

‘Reasons to be optimistic’ about rental market, but equivalent of 40 per cent of new condos in next two years would have to become rentals, says economist

By
Business in Vancouver
September 27, 2019





rental sign
Metro Vancouver's rental market could be close to stabilizing, according to a new RBC report. Photo Dan Toulgoet


Metro Vancouver’s rental market has a shot at becoming sustainable in the coming years — if at least 40 per cent of new condos, or an equivalent supply of other units, make it into the rental pool, according to a new report from the Royal Bank of Canada.

The bank calculated that Metro Vancouver has a deficit of 3,800 rental units that it would need today if it were to achieve a vacancy rate of three per cent — what RBC considers to be equilibrium for the market.

The current vacancy rate is below one per cent, but the Sept. 25 report found that “strong construction activity” puts Vancouver on track to close this gap “within a couple years.”

“There are reasons to be optimistic about Montreal and Vancouver [metropolitan areas], where strong apartment and condo construction will send a wave of new rental units to the market,” the report stated.

Report author and RBC senior economist Robert Hogue told Business in Vancouver that the City of Vancouver’s 10-year housing plan has been a “positive development” for addressing the regional affordability crisis.

“The real key here will be to deliver and we’re seeing, for example, for purpose-built rental that developments over the last couple years have not met targets,” he said.

“But nonetheless, that approach would be something to be emulated in other places like Toronto, for example.”

The RBC report calculated that Greater Toronto has a deficit of 9,100 units, while Calgary has a surplus of 300 units, if those cities were to reach three per cent vacancy rates.

Looking ahead, the report said that Metro Vancouver would need 11,300 more units per year to meet new demand over the next two years (not including the current deficit of 3,800 units). Hogue confirmed to Glacier Media that this would require a total of 26,400 additional rental units across two years to hit a three per cent vacancy rate.

As of July 2018, there were 28,700 condo units under construction and 9,100 rental apartments under construction in Vancouver. Hogue said that the 9,100 rental units under construction would bring the total gap to 17,300 across two years. "That’s in fact 60 per cent [of new condos under construction], but we assume that [condo] completions over the first half of this year have reduced the deficit," said Hogue.

When asked whether it was likely even 40 per cent of new condos would go directly into the rental pool, Hogue pointed out that “other sources of rental supply (e.g. laneway housing, basement apartments, older condos, etc.) will reduce pressure on new condos to close the gap.”

Hogue's report stated, "The resurgence of purpose-built rental apartment projects in the past three years has been encouraging. This set off a wave of new supply now coming to the market, which should eventually stabilize rent.

“Whether this brings real relief to families remains to be seen. Vancouver’s rental stock is the least ‘family-friendly’ among Canada’s largest markets.”

Hogue noted within the report that just over a quarter of purpose-built rental apartments and townhouses in Vancouver have two or more bedrooms compared with about 50 per cent in Calgary and Toronto and about two-thirds in Montreal.

torton@biv.com

@reporton

— With files from Joannah Connolly, Glacier Media Real Estate


Copyright © Western Investor

Comments

NOTE: To post a comment you must have an account with at least one of the following services: Disqus, Facebook, Twitter, Google+ You may then login using your account credentials for that service. If you do not already have an account you may register a new profile with Disqus by first clicking the "Post as" button and then the link: "Don't have one? Register a new profile".

REW.ca welcomes your opinions and comments. We do not allow personal attacks, offensive language or unsubstantiated allegations. We reserve the right to edit comments for length, style, legality and taste and reproduce them in print, electronic or otherwise. For further information, please contact the editor or publisher, or see our Terms and Conditions.

comments powered by Disqus

Email to a Friend

Close
Most Popular
Get the WesternInvestor.com Newsletter