@DouglasTodd Three reasons why rents suddenly dropped in Metro Vancouver

Very good article by Todd regarding the COVID-19 immigration related impacts on rental rates:

The advertised rent for a two-bedroom apartment has plunged by 15 per cent in the city of Vancouver, one of the biggest drops in Canada, as COVID-19 makes its bewildering way through the economy.

Many of the more than 800,000 tenants across Metro Vancouver were riveted when Rental.ca posted the city’s rent-price declines last week. The average rent demanded for a two-bedroom apartment in the city of Vancouver dropped by almost $450, to $2,478 a month.

But why, exactly, have Vancouver and Toronto and their suburbs been slammed?

“A lack of immigration, a decline in international students, a decline in short-term contract employment, and continued affordability concerns because of job losses are to blame,” said Ben Myers, president of Bullpen Research, an affiliate of Rental.ca, in a commentary.

All of which makes sense. But it needs unpacking.

Vancouver and Toronto are subject to some of the same COVID-19 forces — tremendous job loss and swelling household debt — that weakened countless rental markets in the world because of lockdown.

But Metro Vancouver and Toronto also contain some of the world’s highest proportions of foreign-born residents — immigrants and especially temporary residents, such as international students and guest workers. Most are young. And most rent.

That makes these two large Canadian metropolises more vulnerable to global migration patterns and to Canada’s clampdown on its international border, which has abruptly cut inbound flows of people to a trickle.

That lead Paul Danison, another analyst for Rental.ca, to go so far as to imagine the tenants of Vancouver and Toronto possibly being dug out of the hole they have found themselves trapped in: Rental-vacancy rates of less than one per cent.

“Imagine if you can, Toronto and Vancouver with a healthy three per cent vacancy rate, and rents falling by the end of the year rather than rising. A few months ago, that would have been laughable,” said Danison.

“But because of COVID-19, Canada will have less immigration, fewer international students and, with the border closed, not nearly as many seasonal and part-time workers. All typically are renters.”

Several factors are at play.

Tighter borders means landlords who once offered costly short-term rentals, like those on Airbnb, have been hammered in attractive cities like Vancouver, whose economies rely more than most on travellers.

Short-term rental providers have been moving their often-stylish apartments to the long-term rental market, which has been increasing supply, offering tenants more choices.

Rohana Rezel, a housing advocate and past candidate for Vancouver city council, is part of a group monitoring Craigslist and other real-estate forums. They’ve discovered short-term rentals are “collapsing” and hundreds of units are now switching to long-term rentals.

“People offering their places for rent on Craigslist are now blatantly saying it used to be an Airbnb. They’re boasting it was rated five stars,” says Rezel, who adds that many such landlords started off charging outlandish long-term rents, which they were forced to slash.

As in many cities around the world, many owners in Vancouver and Toronto are also feeling pressure to somehow off-load their homes, either because they have lost wages or are going into deeper debt. But they’re in a bind, because it’s no longer a house-seller’s market.

The Canada Mortgage and Housing Corporation, Moody’s and other analysts are predicting double-digit house price declines over the next year or two. So some would-be sellers are trying to wait out the downturn by renting their places, thus also increasing supply.

Thirdly, and perhaps most distinctly for a desirable cosmopolitan city like Vancouver, there are strong indications many of the region’s young temporary residents (foreign- and Canadian-born) have climbed on planes and headed home, often to live with their parents.

That means a hefty drop in demand for rental suites.

A CMHC analyst, Andrew Scott, has found an astonishing 46 per cent of Metro Vancouver residents between the ages of 18 and 44, the group most likely to rent, have been non-permanent migrants — a ratio almost unheard of in other parts of the world.

Until recently, at least 100,000 international students have been living and working in Metro Vancouver, plus another 50,000 so-called “international mobility” employees and temporary foreign workers.

“Many temporary residents just packed up and left,” says Rezel, a high-tech professional who first came to Canada from Sri Lanka as a graduate student.

Like me, when Rezel visits the city’s restaurants, pubs and cafés, he says he often asks friendly servers and others about themselves. Four times out of five such hospitality staff invariably answer that they are in Canada on study or work visas.

As colleges and universities began in March to offer their courses only on the internet and most service jobs disappeared overnight, a large portion of these intrepid young people were compelled to leave behind the country and their rental apartments. Rezel’s Japan-born wife, who is involved in her expatriate community in Vancouver, said that’s what happened in her circle, too.

Who knows when or if most of these temporary residents will return?

All of which goes to suggest Metro Vancouver’s suddenly lower rental rates are likely to remain so for at least the medium term.

Source: Douglas Todd: Three reasons why rents suddenly dropped in Metro Vancouver

About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: