The real cost of housing?

Our last few blogs have talked about the decrease in rental prices. What we did not discuss is why are the rental rates so high. Prior to covid rents were considered high, then covid hit. At a time when many people around the world were being asked to stay home, learning to work from home and then being laid off from their jobs, the housing sales market in Canada took off. 

Housing sales and prices rapidly increased. How did this increase the rental market?. 

In Canada and especially the Vancouver area a majority of rental properties are individual units owed by investors. What we saw were many owners electing to sell their rented properties to new buyers who were moving into the units.This created a large number of renters seeking a new place to live.  Now that we are seeing a decline due to over supply will this trend solve the cost of renting and housing. The answer is no. 

Why are rental properties so expensive?. It is our opinion it is the type of product being built.

Here are a few items we feel have increased the cost of rentals in BC. 

One of the biggest factors increasing costs of properties in Vancouver are the amenities in the buildings. Many condos build various amenities including fitness rooms, pools, common rooms and guest suites. In recent years we have seen newer strata buildings adding more and more amenities to entice the owners to purchase the condos. Many buildings have added larger fitness rooms, common areas with BBQ’s, shared working spaces, basketball and or sport courts. The increasing quality of ammentines increases strata fees to maintain the building's amenities. With higher strata fees individual landlords need to have a higher rental price to make the renting of their property manageable.          

Over the past few years we have also noticed purpose built rental buildings adding more higher end amenities similar to those found in strata buildings. The difference with rental buildings that have amenities and the strata building is that the income from the rent is the only source to pay for these amenities. In a condo building the strata can demand levies from the owners to pay for short falls. This creates a situation where the rental building needs to keep their rental prices higher to cover the costs of maintenance to these. 

Another increased costs for rentals are the amenities within the units. Many units have high end appliances including laundry and kitchen appliances. With the increased demand for electric cars by governments, new buildings are being required to install electric charging stations in the parking garages including at each parking stall. This creates increased costs for developers when building new projects.

There was a time when rental buildings were built with shared laundry facilities, and many young people today have grown up with all the modern amenities and the same conveniences they had at home. Anytime we add more amenities to the unit and or building it increases the cost of building and maintaining the property.      

This is not likely to change as long as developers have the decision to build what they want instead of what the market needs. The downturn we are in now is going to hurt many small investors over the next few years as prices decline to levels they are nto able to sustain for long periods of time.  Municipalities should demand more affordable properties be built by developers, or not approve the development. 

Need help managing your investment properties. Cartref Properties can assist you, call today to discuss your needs. You can find more information about us at: www.cartrefproperties.com