Who can rent their condo?
Another reason rental rates are declining is related to who has the right to rent their condo.
In 2010 the strata property act was changed requiring all new developments to indicate a time frame of how long a newly built strata lot could be a rental unit. Developers were first indicating units could be rented for 25 or 50 years, then they started indicating 100 and 200 years. Effectively meaning units will be a rental for as long as the building exists.
Prior to January of 2010 buildings were not required to identify a specific time frame and a unit purchased directly from the developer would be permitted to be rented as long as that owner owned the unit. These buildings were permitted to create bylaws restricting the number of rentals in their building. Once the original owner sold the property to a new owner that unit was no longer permitted to be rented if the building had a rental bylaw restriction. In November of 2022 the BC government changed the strata property act removing the ability for strata built before 2010 to have a rental restrictions bylaws. The intention of this change at the time was to add supply to a very tight rental market.
When this was first enacted it had no effect on the market, we are now seeing it affect the market due to a slower sales market. Prior to this change, if a person who needs to relocate for work would request special permission from the strata to rent their unit and if not granted would be forced to sell their property. Since 2010 there have been two different products in the rental market. Most of the new products were purchased by investors with the intention to rent the units for as long as they owned the property.
For units in buildings built before 2010 they were often rented for shorter terms of one or two years until the owner returned or then sold the unit. We are now seeing more of these units enter the market increasing the supply in the rental market. A major difference with these products is they are larger in size compared to newer products. Many of these products have also been owned longer and may have less costs involved to make the rental numbers affordable which is putting pressure on new products to lower their prices.
When you increase the supply of products compared to demand it has a direct effect on the prices in the market place. We don’t anticipate this downward pressure will stop for about two more years until the current development has completed and there is a gap in new products being developed.
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