As a licensed realtor, designated CPA, and real estate investor, I am specifically asked how the rental market is doing and how the rental market hype was created in the first place.
It was reported by BC Business Magazine that over 60,000 new residents move into the province of BC each year. This stat became more apparent to us when we listed one of our suites in Nanaimo for rent. We had over 60 emails and requests to see our suite, many of the emails were from people moving here from another country or province and they were willing to rent the suite without seeing it before signing a rental agreement, as they wanted to secure a place for their arrival. The most common reason why people were looking to rent our suite was because they were moving to the area for school. The secondary reason for relocation was for a job opportunity.
How does this increased demand affect the rental market? It’s simple supply and demand curves from Economics 101: the greater the demand, the higher the price. For instance, our downstairs tenants in Nanaimo gave notice to move out after only 8 months of occupancy, we could therefore set a new rental rate for the new tenants, which was 11.6% more than what our previous tenants were paying.
It becomes a ripple effect in the rental market, as one area increases in rent and then becomes unaffordable, those renters decide to move elsewhere. Demand increases in the new city, which then pushes prices up in the new city. That, mixed with foreign investment and vacant properties have fueled the rental market to the fire it currently is.
Current rental market analysis
I conducted an interesting study just two weeks ago. The study took the rental market rates found online through sites such as Kijiji and Craigslist for one and two-bedroom cities in BC (Vancouver, Lower Mainland, Whistler, Vancouver Island and Okanagan/Interior). I then took all of the active MLS listings for one and two-bedroom condos and townhouses for those same cities, and was able to compute a return-on-investment based (ROI) on the data. This ROI is a percentage that shows the approximate annual return on purchasing a one or two-bedroom condo and renting it out (other carrying costs were not included in this calculation). The following charts represent my findings:
Of course, the averages are based on the average for the entire city; certain neighbourhoods command higher prices and if it’s a townhouse, loft, or penthouse, or close to being brand new, it will also command a higher rental rate.
Best cities to invest in
As you can see, the best performing rental investment cities with the highest ROI are: Chilliwack, Mission, Whistler, Courtenay, Penticton and Vernon.
Best cities to rent in
If you are a renter, Kamloops has the lowest average for a one-bedroom rental at just $900 a month. If the Interior is out of the question, Campbell River, Chilliwack and Abbotsford are the next cheapest cities for one-bedroom rentals.
To follow me and the ongoing rental rates across BC, follow me at danielleroyrealty.com and Danielle Roy bc on Instagram and Twitter where I provide monthly rental market updates, housing sales updates, tax implications for real estate investors, and other real estate industry updates.