Purpose-Built Rental Market is Booming

For the last 40 years or so, investors in the housing market have routinely shied away from purpose-built rental projects in Vancouver. It just made so much more economic sense to purchase condos.

It still does, of course. But the ever-increasing demand for high-end purpose-built rentals among Metro Vancouver’s priced out populace is finally shifting that equation.

A recent report by the Goodman team at HQ Commercial gives us some data to back this up. In 2018, over $3 billion of purpose-built rental properties exchanged hands in Metro Vancouver.

While the actual number of properties sold is only five more than the previous year – a total of 155 in 2018 – the valuation of the properties represents a 37% increase over 2017. The average price per suite has increased 23%, to $530,401.

The short supply of rental units, which is exasperated by the hurdles and delays presented in the approvals process, is driving this shift in investor thinking. The huge demand outweighs the uncertainty of the political climate, at least for now.

Meanwhile, construction of new market and non-market rental housing is the highest in 30 years in Vancouver. There were 3,433 units of market and non-market rental housing started last year in the city. The total for the whole of the Metro region was 6,425 starts.

Daniel Greenhalgh, ENM’s co-founder, is proud that Willoughby Walk, our flagship 191-unit purpose-built rental project, is adding to the much-needed supply in the region.

“We’re seeing our first tenants move in next week, and we’re excited to watch the whole property fill up with couples and families over the next few months. We’re hoping every one of them makes Willoughby Walk their home for the next twenty years.”

Statistics Canada reports that over the last decade, the amount of rental property under construction has tripled across the country, and is now roughly equal to the construction of housing stock built for ownership. Percentage wise, the largest increases are right here in Vancouver, where increasingly, families are planning for a life of long-term renting. The high home prices are the main factor, of course, but the tougher stress tests on residential mortgages are also driving people to the rental market.

“It’s getting harder and harder to get approved for a mortgage in Vancouver,” says Daniel Greenhalgh. “The rental market is going to continue to spike here, and we’re hoping that we can help raise the standard of what people expect from a rental unit and rental property.”