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Rental Market Booms Because Demand Exceeds Supply

Close to $3 billion worth of purpose-built rental properties changed hands in Greater Vancouver last year, according to the numbers crunched by the Goodman team at HQ Commercial.


The sum represents a 37% increase from last year, even though the number of properties changing hands totalled 155, just five more than in 2017. The average price per suite increased 23%, to $530,401.

“The real story behind the stats is all about the dirt,” Mark Goodman said. “The rarity of land throughout Metro Vancouver, coupled with investment growth in the condo and rental sphere, continues to drive our markets.”


 While strong demand for rental accommodation allowed investors to enjoy good cash flow in the past, the motivation today is increasingly about redevelopment opportunities. Supply can’t keep up with demand, and an aging stock suited to redevelopment in rental-friendly municipalities means many properties’ land values have risen – in some cases, Goodman said, “almost beyond recognition.”


Deals in the West End, for example, broke the billion-dollar mark as 21 buildings comprising a total of 1,373 suites sold.

The strong activity put paid to mid-year analyses that saw a slowing market for multi-family properties.

Avison Young, which tracks sales $5 million and greater, felt that political uncertainty in the run-up to last October’s civic elections would combine with government efforts to cool real estate markets and rising interest rates to cool deal activity and pricing.

“The likely pause in the market will allow for potentially better pricing to be achieved on properties than what has been available recently,” Avison Young opined in its mid-year multi-family report. “Purchasers will gain more certainty and a greater understanding of what pricing the market can support.”

While this wasn’t the case in Greater Vancouver, political uncertainty remains.

Goodman reports that some investors are shying from investing in purpose-built rental properties as a result. However, with no new land being created and the development environment still fraught with hurdles and delays, short supplies and strong tenant demand seem poised to buoy opportunities for investors.

Civic support

“City of Vancouver is doing far more than any other city in the region to both protect and increase rental housing, and is a leader nationally in creating new rental housing,” a sunny summer press release from former Vancouver mayor Gregor Robertson stated last June, notwithstanding industry criticisms of the lengthy approval process for projects. “The delivery of new rental housing in the city is at levels not seen in 40 years.”

The press release went on to note proudly that “roughly 50% of all rental housing under construction in Metro Vancouver is within the city of Vancouver” (though many feel Vancouver shouldn’t be shouldering the region’s housing crisis solo).

Year-end Canada Mortgage and Housing Corp. (CMHC) figures bear out some of those claims.

Construction of rental housing in the city reached its highest level in 30 years in 2018, with 3,433 units of market and non-market rental housing started. This represented 53% of the regional total of 6,425 starts. Five years ago, that proportion was 38%.

Total Vancouver rental housing starts between 2014 and 2018 represented 45% of the region’s starts.

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