If You Have Investment Properties Earning Rent – You Must Read This
As COVID-19 makes its way through our lives and the economy like a hurricane sweeping over land, it leaves nothing untouched. Its has also affected rents. Cities like Vancouver and Toronto are seeing rent reduction rates that would have been unheard of at the beginning of the year.
While rents in some Canadian cities have declined a bit or even risen slightly in the last few months, the cities of Vancouver and Toronto, homes of the priciest rental market in the country, have seen rents falling fast because of the pandemic.
Last week, Rental.ca posted figures showing that compared to a year ago, rents in Metro Vancouver are down by about 9%. The average rent demanded for a 2 bedroom apartment in Metro Vancouver had dropped by almost $450 to $2,478 a month.
Reasons for rental declines:
Flood of new rental inventory has hit the market
In the pre COVID-19 economy, real estate investors with a portfolio of homes would be renting them out on the short-term rental market. They would be making more money renting out homes for days or weeks, than they would with traditional long-term leases. But now with the lockdown and restrictions on movement across borders and regions, the short-term market has virtually dried up overnight.
This has made some owners seriously think about selling their investment properties, while others are being forced into the long-term rental market, adding much needed supply to the tight rental markets that the Lower Mainland has been experiencing for the longest time.
New home owners stuck with 2 homes
Some homeowners bought a new home before the lockdown and have yet to sell the old one. They are in a bind as this is no longer in a seller’s market and selling has become much more difficult. An option they face is to rent out the home that is for sale, bringing in some much needed funds, while they wait and hope for prices to rise again.
Decline in international students
The lockdown has forced a ban on international travel. Many universities are contemplating on line education that will not require international students to be physically on campus. Canada has over 300,000 international students per year studying at its institutes of higher learning. Their absence will be noticed and make a noticeable impact on rental properties and the economy.
Decline in seasonal workers and visitors.
Canada will have less immigration, fewer international students and, with the border closed for the foreseeable future, not nearly as many seasonal and part-time workers. All typically are renters.
Tighter borders provincially and internationally means landlords who once offered costly short-term rentals, like those on Airbnb, have been hit hard in attractive cities like ours, whose economies rely more than most on the traveller. Former airbnb properties are now being marketed as long-term rentals.
More rental units built ready for occupation.
The dire rental-housing situation that Vancouver has faced over the last few years, has prompted the municipal and provincial governments to push for an increase in the construction and availability of purpose built rental units. Many of these building which were on the drawing board a 2-3 years ago, are now fully constructed and inviting tenants to rent. This has further increased the inventory of rental units available in the region.
Home buyers are buying homes today for potential move-in dates 30, 60, or 90 days from now. If you are contemplating a move, contact us. We have the experience, tools and know how, to navigate this uncertain market.