As the Vancouver housing market suffers from falling prices and sluggish sales, developers are increasingly turning to the rentals.
“Given the uncertainty in the Canadian housing market, inflated home prices, elevated levels of household debt, and mortgage stress tests, it seems more and more buyers are opting for the sidelines, choosing to rent instead,” writes Vancouver-based realtor Steve Saretsky in a blog post.
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“It appears real estate investors and developers are taking note, funnelling money into purpose built rental units,” he adds.
Saretsky points to the elevated level of rental starts in Greater Vancouver as a sign of this playing out on the west coast.
At least one developer in Metro Vancouver is planning to relaunch a condo project as rentals.
Porte Communities had originally intended to construct a mid-rise condo project called Alden in South Surrey but has since shifted gears and plans to build rental apartments, Livabl has learned.
Vancouver’s drum-tight vacancy rate can make rentals an attractive option even at a time when home prices are falling and demand from buyers has dissipated.
Although some developers who had original envisioned condos may pivot to rental housing, there are challenges with switching approaches mid-stream.
Cameron McNeill, executive director and partner at MLA Canada, a firm that markets and researches Lower Mainland condo developments, notes that many developers are simply standing on the sidelines instead.
“There’s this real waiting and watching the market situation,” he tells Livabl.
MLA estimated earlier this year that 17 concrete condo projects accounting for a total of 5,000 units had delayed coming to market in the Lower Mainland.
“They weren’t designed as rental,” he says of the projects on hold.
“They (developers) don’t have any government initiatives or incentives in order to build rental, they were planned… and designed as a condominium project, and now that the market has changed, these projects don’t make any sense in these market conditions — so they’re on hold,” he says.
The longer the market slowdown continues, the more likely it is developers will look for alternatives.
“The development community is watching the market carefully, and they are evaluating their options, and some of those may include rental,” says McNeill.
“But very few [developments] are yet verified to be switched over to rental,” he continues, adding, “I’m going to guess that very few of them make sense to do rental either.”