Although the BC government introduced an artificial rental cap at 2.5% for 2019, BC landlords will be increasing rents in 2019 as strong demand for rental housing continues amid high home prices and tighter mortgage lending rules.
According to a National Rent Report from Rentals.ca, average rents nationally will rise 6% but in Vancouver, they could go up by 7%. In my opinion, renovictions will help BC landlords get around the 2.5% rent increase limit and after some minor updates to the unit or house, re-let at market rates.
The new mortgage stress test, higher interest rates, and home prices at the entry level segment have dramatically increased the number of people looking for rental accommodation this year. Many young couples and families have decided to postpone purchasing a home, which has driven two-bedroom rental rates to nearly $2,600 a month in Vancouver.
There is trepidation among potential homebuyers following the bubble-like conditions and the subsequent price correction in the Vancouver housing market last year. Many Vancouverites are choosing to rent instead of buy, with existing tenants staying put to avoid paying the higher market-rate for an available unit. This phenomenon has reduced rental listings in this high-demand environment and renters face tough competition when trying to lock down a unit. We currently have the lowest vacancy rate in North America at 0.8%.
High immigration (more than 61,000 immigrants expected in 2019) and strong employment is fueling demand for housing but buyers are cautious.
Flat or declining resale house prices in 2019, however, will spur investors to swoop up good income-producing assets at a discount. Landlords will firmly be in the driver’s seat in this low-vacancy rate environment. Tenants will be in no position to negotiate rental rates down. In fact, RBC reports rents will increase to 16% by 2020. That’s 2 – 3 times the rate of inflation.
If you are looking to invest in real estate in this slow market this year, we can help crunch the numbers for you to help you decide if purchasing an income producing asset is right for you.
