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Are Vancouver rent prices going up?

by Corben Grant on 16 Aug 2022

Vancouver has for a while now been considered one of, if not the most expensive city in the country. This is true both in the price of purchasing homes, where the average price of a detached home has remained above $2 million, as well as in the cost of rent.

Vancouver, even despite high prices, is simply a hot destination for renters. Being the large modern city it is, Vancouver naturally attracts many residents for jobs and lifestyle options. In addition to this, the city takes in some of the most immigrants in Canada, as well as attracts many renters for things like post-secondary education opportunities.

With such high demand, and geographically speaking not much room to expand, property in the city naturally comes at a premium, and renters have faced increasing rent values in recent times.

Now, as home prices remain high, interest rates make homes even less affordable, and as the city opens back up post-pandemic, rents are holding high in Vancouver.

Current average rental price in Vancouver

According to a rental market report from liv.rent, the average rent price in Metro Vancouver for unfurnished one-bedroom units is currently around $2176 a month. This represents an increase of almost $350 since January of this year.

In Vancouver proper, this average is even higher at about $2498 a month for a one-bedroom. Two and Three bedroom units in Vancouver proper currently go for $3597 and $4196 respectively.

Prices vary across Metro Vancouver

Prices vary across the metro region, with some areas like Langley and Surrey displaying much lower prices in the $1700 range for a one bedroom, while prices in West Vancouver are even higher, with an average one bedroom rent of over $2600 for an unfurnished unit. According to the report, this makes West Vancouver the single most expensive area to rent unfurnished apartments in the region and nationally.

According to the report, the average renter spends about 33% of their income on rent. Based on the conventional guideline that one should spend a maximum of 30% of their income on housing, a resident of West Vancouver would need to earn around $100,000 a year to afford the average one-bedroom apartment.

How do other cities' average rental prices compare?

Looking at other cities, Vancouver is far from the only one experiencing high rent right now.

British Columbia Rent comparison

In British Columbia, Victoria has similarly high rent at around $2,125 for a one-bedroom according to Zumper.com. According to the same source, rent in Kelowna is only slightly lower at $1950 on average.

Canada wide comparison

Looking at Toronto, Canada's other infamously expensive city, the average rent across the GTA in the second quarter of 2022 was $2,269 for a one-bedroom apartment, according to the Toronto Regional Real Estate Board. The City of Toronto itself saw rent prices about on par with the regional average.

Other cities in Canada aren't cheap per se, but nonetheless have much lower rent rates than Vancouver. In Montreal, the average rent for a one-bedroom was $1,573 according to liv.rent, while cities like Ottawa, Hamilton, Calgary, and Edmonton each have a median rent in the range of $1200 - $1500 according to the most recent rental data from the Canada Mortgage and Housing Corporation.

Is rent going up?

For the past number of months, Vancouver has seen month-over-month rent increases and that trend seems set to continue. Despite a small dip seen last month, prices have once again continued to ratchet higher in August.

Even if the recent dip was a sign of things to come, given current conditions it seems unlikely for rent to fall significantly in Vancouver. Canadian immigration is once again picking up, students are returning to schools, and more are returning to downtown Vancouver following pandemic shutdowns.

At the same time, high prices in the housing market are pricing out would-be buyers and moving them toward the rental market. In addition, there is a severe supply shortage in some areas of the city. All of these factors will keep rent prices elevated.

Different neighbourhoods see different price changes

The question of price changes also becomes more complicated once you look at individual neighbourhoods within metro Vancouver. Across the city, month-to-month price changes vary greatly. In most areas of the city, prices increased month-over-month, while north Vancouver saw significant decreases. The largest increase was seen in Richmond, where the price of a furnished one-bedroom apartment increased by 24% since last month.

Are rentals profitable in Vancouver?

For renters, increased prices are clearly problematic, but this may not be the case for investors. Drawn to the high rent prices, some may think that Vancouver is a great investment.

High rent may not be ideal for cash flow

While a city like Vancouver is generally a sound investment for appreciation, it is not always going to be as good as it seems for cash flow. Keep in mind that the down payment and carrying costs of the city make it expensive to receive and maintain a mortgage, and though there are high rent prices, margins may be thin.

Consider also if the price trends stagnate or turn around, while interest costs are still going up. This will make cash flow in Vancouver rentals even tighter. And, even as carrying costs increase on your home, rent controls in British Columbia will limit your ability to increase rents to match. The current maximum increase without special allowances is 1.5% for 2022.

Still may be a good investment in other ways

On the other hand, your investment in Vancouver will likely hold its value very well, and when it comes time to sell there is a very good chance for appreciation barring any major crashes. In the meantime, high rental demand means that even if your rent margins are low, you will at the very least be able to keep your unit consistently tenanted.

Is Vancouver a bad real estate investment? Not at all – but it isn't high rent prices alone that make it so. If cash flow is your primary interest, cities like Calgary with lower home prices but still plenty of rental demand will be much more suitable.

Conclusion

Though Vancouver has some of the highest rent in the country, it is far from the only area seeing high prices. Given the current condition of the housing and rental markets, as well as the persistently high demand in the city, it is clear that rent will remain expensive in the city. Despite a drop in prices last month, August figures show prices once again on the rise.



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