loading...
Rental Rates are on the rise.
By Kathy Michaels
Economic tumult hasn’t left everyone in a state of disrepair; it turns out that the last year has actually been fortuitous to those who rely on rental housing.
The Kelowna area apartment vacancy rate increased to three per cent in October 2009, with the bulk of growth happening in the downtown core and Rutland.
For the last couple of years the vacancy rate hovered around zero, earning Kelowna a dubious reputation for being one of the most difficult places for renters to find a home in the whole country.
It’s an issue that raised concerns from the business community and those working at the City of Kelowna, as it meant there was significant pressure on both low income earners who were faced with sky rocketing rents and businesses which found the low rate to be a stumbling block for recruiting new employees.
So it was with a touch of relief that Theresa Eichler the city’s community planning manager, received the news the rate increased so dramatically in the last year.
“It’s surprising that the rates have come down to the extent that they have and that Kelowna is one of the only cities in Canada that has seen a decrease like this,” she said.
Other Okanagan cities that had previously struggled with low rental rates also experienced similar growth, but in years past it was Kelowna that received the bulk of national attention for its tight rental market, and the high cost of monthly rentals.
“I have a graph and have been looking at it in terms of the timeline of what’s been happening and the rents were climbing steadily and predictably until 2005 to 2006 —and then it went insane,” Eichler said.
“So what we’re seeing now is more realistic rents I think.”
Paul Fabri, the market analyst who produced this morning’s fall vacancy survey for the Canadian Mortgage and Housing Corporation, agreed rents are coming down.
According to his findings, both apartment and townhouse rents have edged down in response to rising vacancy rates. In October of 2008, the cost of an average two bedroom apartment was about $967, but this year the price dropped to about $897.
So what changed? Fabri explained that the market crash created a shift in both the makeup of renters and the housing supply.
“Demand for purpose-built rental housing has softened in response to slower employment growth,” said Fabri. “Increased competition from investor-owned condominium rental units also contributed to higher vacancy rates.”
Favourable interest rates together with declining home prices earlier this year made home ownership more attractive to renters during the past year, especially those paying higher-end rents.
That’s something Century 21 realtor Jason Neumann has seen first hand among his clientele, and it’s not necessarily beneficial combination for all.
“The rental market used to be a lot more lucrative,” he said, adding that those who own rental properties are having to set their rates competitively.
For those who were saddled with properties they had initially intended to flip, the dilemma today is whether they should carry on bringing in lower rents and financially babysit the property until the market turns around or sell at a loss.
When the market picks up, conditions could change dramatically, but Eichler said the city is working to make the situation more stable.
One method was creating a system where permanent rental housing could be considered as a means to meet the city’s affordable housing demands.
“So if a developer wants to do a development that involves zone change to increase density, or any other land use change to increase density then we would accept permanent rental housing back,” she said. “We would do that without controlling rent or the income of who rents.”
The city has also added its voice to the Canadian Federation of Municipalities, which is making the case for a national housing strategy that would stiumulate the rental market.
kathy@kelowna.com
Tags: CMHC, Kelowna, rental rates, rents, vacancy rates
