Any stigma associated with renting an apartment versus buying a condo in high-cost housing cities has disappeared, Vancouver Real Estate Forum panelists concluded at an April 11 session.
“People are deciding rental is not just a stepping stone. Rental is an end game,” said Dan Sander, director of Hollyburn Properties.
“We don’t want to spend 75 per cent of our income owning a condo. We want to live our lives and enjoy our lives. People are deciding, ‘I’m good with renting. I don’t need to own a condo. It’s not an identity issue for me.’ ”
He noted there is “a huge gap” in the cost of renting versus owning. In 2016, in the Vancouver area, a one-bedroom apartment rented for an average $1,425 per month versus $2,456 for a condo, not including strata or condo fees and property taxes.
In Vancouver, renting is “literally half the cost. I absolutely think it’s here to stay.”
Not only for millennials
Ugo Bizzarri, managing director, portfolio management and investment and co-founder of Timbercreek Asset Management, said the prices of single-family homes in Toronto and Vancouver bode well for the multi-residential sector in those cities.
Renting is becoming much more viable in the long-term, he said. “It’s a solution not only for millennials but for seniors who are selling their homes and want to rent.”
Todd Nishimura, director, marketing, vertical resident services at GWL Realty Advisors, agreed with an “emphatic yes” it’s good time to be a renter. In the past, renting “meant you weren’t able to buy,” but the stigma has gone by the wayside as the inventory of rental has improved.
Nishimura said his company is using Seattle as a blueprint as to where the Canadian rental market is going. In the home of the Space Needle, apartments have been rented to Seattle Seahawk and Seattle Mariner athletes for $5 per square foot.
Serious supply issue
John Lynch, manager, business development at CMHC, said a balancing act is needed when it comes to luxury rentals.
“How many millennials can afford $4 per square foot?” he asked.
Many tenants in Vancouver are enjoying nice accommodations in older buildings that go for $1.75 a square foot, he noted.
When it comes to rental housing in Vancouver, the problem is supply. Only 1,600 rental units are coming to market in Greater Vancouver in the next six to 12 months, of which 600 are in Vancouver, Sander noted.
That’s nowhere near the supply that is needed given that Metro Vancouver is accommodating 30,000 new residents per year.
There are 11,784 new rental units in the pipeline for Greater Vancouver, noted Mark Goodman, principal of The Goodman Report. But, he acknowledged, it can take nearly three years to get a project off the ground.
“Unless they’re being built, they’re not coming to market,” said Bizzarri. “We need more supply.”
Goodman said there are concerns B.C.’s foreign buyers’ tax could result in dampening enthusiasm for the multi-residential investment sector. In fact, 174 rental buildings changed hands in 2016 in the Greater Vancouver area, down four per cent from the previous year.
However, the decline was more significant in the final two quarters of 2016 after the law was implemented.
Big hike in price per unit sold
On the other hand, the average price per sold suite increased a “staggering” 52 per cent in Metro Vancouver to $377,000. In the city of Vancouver, the average price per suite increased 36 per cent to $494,000.
Nishimura said increased competition has led to a noticeable shift in the level of sophistication that’s gone into the design, development, marketing and leasing of multi-residential rental inventory.
Technology is behind many of the improvements.
He said his company is imitating the “Expedia” approach – in which prices are variable by the hour for flights – and doing that with rents.
“We’re updating them every day.” It’s also looking at rolling out online leasing or paperless payment technology.
Today’s consumer also demands things need to be easy, he said. Currently, many of its tenants have to sign for cheques, which cost them $40 to order.
“Millennials look to us like we’re crazy. It doesn’t start you up on a very good foot.”