Victoria rental rates to rise in 2017 as new housing inventory fails to satisfy demand
MIKE KOZAKOWSKI, CITIFIED.CA
Published December 21, 2016
Monthly rental rates for greater Victoria and southern Vancouver Island apartments are expected to spike in 2017, according to sources familiar with Victoria’s rental housing market.
Rising construction costs and severely depressed housing inventory have created a scenario where demand for real-estate, be it market condos or purpose-built rental apartments, is far outpacing available supply.
"Purpose-built rental housing remains the most secure and affordable form of rental housing. However, despite a steady stream of purpose-built rental units coming onto the market over the next several years, present-day renters searching for homes are finding the situation to be frustrating both in terms of availability and cost," says David Hutniak, CEO of British Columbia's rental advocacy group, LandlordBC.
Rental rates for upper-end, newly completed purpose-built apartment inventory in downtown Victoria and periphery areas are expected to break above $2.70 per square foot (per month) and in some cases reach beyond $3. Those rates translate into newly-built one-bedroom apartments renting for $1,350-to-$1,650 per month, a jump from $1,200-to-$1,450 in the present-day market. Landlords have also been given the go-ahead to raise rents
for existing tenants by upwards of 3.7%, the highest yearly rate increase since 2012.
Rental housing inventory throughout the Capital Region will grow by some 1,400 units
over the next two years. Various levels of governments have also pledged to deliver nearly 2,000 units of subsidized and affordable housing to the region over several years (the exact details of the housing strategy have yet to be revealed).
However, Hutniak cautions that new inventory will not only be supplying units to a market starved for housing, some of it is destined to replace aging units that have surpassed their best-before dates.
“It is estimated that over 20,000-units [more information
] of the region’s rental housing supply will require some form of remediation in the coming decade, be it full-on redevelopment or lengthy repairs and upgrades. This is an issue my colleagues in the rental housing industry have raised for many years. Unfortunately the implications have failed to resonate until very recently.”
The condo investor market, made up of condo buyers who make their units available as rental homes, has been a major component of Victoria’s housing strategy since purpose-built rental construction waned in the 1980’s.
George Wong, president of Vancouver-based real-estate marketing firm Magnum Projects, says that the rising costs of new-build condo inventory (due to escalating prices for land and construction) will inevitably translate into higher rental rates in order to ensure investments are viable.
“In today’s market, thinking like an investor, if you can secure a new-build one-bedroom or junior one-bedroom downtown Victoria condo for $350,000-to-$375,000, jump on the opportunity,” Wong says.
“With so many downtown Victoria one-bedroom condos now selling for well in excess of $400,000, the rents required to cover the mortgage, strata fees, insurance, taxes, and maintenance fees mean the investor market will be have to charge higher rents for investments to make sense, and there is no way around it. Of course, on the flip-side, for investors who got in early and locked in lower housing prices, their risk has been greatly mitigated by today’s market rates and they’ll have the opportunity to offer more flexibility to their tenants.”
The downtown Victoria condo market is expected to yield several hundred units next year, while some 1,300 condo units
will complete across the region by 2018. C
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