What has caused the rental market to slow down?
Often now when speaking with a client or potential clients the most common question is why is the rental market slow at the moment. The first question is has the Air BnB ban caused the rental market to decrease that much?
Our response is that although the Air BnB ban has contributed to the current market conditions it is not the main or only cause of the slower rental market.
When covid occurred in March of 2020 the first reaction to the rental market was rental prices decreased. In the fall of 2020 the housing sales market started to increase and many individual rental products were sold removing a large number of rental products from the market, which created a significant supply shortage compared to demand.
Governments at various levels have attempted to control the housing market with the implimentation of the Empty homes tax in Vancouver which required a property be occupied for at least six months of the year. The Provincial government had implemented the Speculation tax which also required home owners to occupy the unit or have it rented to avoid the speculation tax.
During covid the economy started to experience high levels of inflation and in 2022 the bank of Canada started to increase the interest rates to slow inflation. This eventually had an effect on the housing sales market which led to less rental properties being sold and removed from the rental market.
The BC Government in 2022 made a change to the strata property act eliminating the right of some strata corporations to have a rental restriction bylaws. Prior to this, properties built before 2010 had the ability to restrict the number of rentals in their building. The intention of this change was to increase the number of rental properties in the market.
The federal government then brought in a restriction on foreign buyers being allowed to buy property in Canada which took effect January 2023. This would slow housing sales which has an effect on the rental market.
Prior to covid and during covid both federal and provincial governments were trying to control the increasing costs of housing by providing developers incentives to build more purpose built rental properties adding more supply to the market.
Provincial governments and other officials complained about the amount of immigrants being brought into the country at increased levels in the past few years. The federal government made changes to the immigration policy reducing the number of students and imigrants that would be permitted to enter the country reducing the demand for rental properties.
In the lower mainland many new condo and rental developments were in the process of being built and are completed and are now entering the rental market increasing the supply to the rental market.
In 2024 the BC government brought in a restriction on short term rentals throughout the province with some exceptions including spaces in your primary residence, and some smaller communities. This prohibits people from renting out full condos or homes on short term rental sites which adds more product to the rental market.
Starting January 2025 a new tax, the anti flipping tax was brought in to prevent people from buying and selling properties in a short period of time. If you buy and sell a property within two years the seller will be subject to an additional 20% tax on the profit of the sale of the property.
The current rental market has been affected by all of the above factors. The one other factor that governments don’t like to admit is the economy has slowed and may or may not be in what is considered a recession.
For all of the above reasons the rental market has slowed causing a greater supply than demand for rental properties. When the supply is greater than the demand this is called a tenant favourable market, which allows tenants to take their time to find the right property and negotiate with landlords for the best rental price of the property. During tenant favourable markets we also find more questionable tenants seeking to move and relocate. Why does this increase?. When small landlords have a property vacant for multiple months it might be difficult for them to continue to keep the property payments without incoming rent, causing landlords to make decisions on potential tenants without performing their due diligence.
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
