With an overall vacancy rate of 3 per cent nationally, Canada’s rental markets can present opportunities for investors in smaller B.C. regions and across the Prairies – with a few notable exceptions.
In B.C., urban areas and suburbs in close proximity to downtown Vancouver tend to trend below 1 per cent vacancies. Though pricey, demand in cities like Burnaby and East Vancouver provide landlords with a steady source of income and potential for an increase in property value.
Kelowna and New Westminster per-door prices are relatively cheaper than Burnaby and East Vancouver and offer higher cap rates for mid-range investors, while Winnipeg offers prospective landlords a chance to enter the Prairie’s most secure economy.
Here are Western Investor’s six picks for the best landlord markets in Western Investor in 2018:
Rental vacancy rate: 0.7 per cent
Average one-bedroom rent: $1,070
Average price per door: $215,000
Victoria’s rental market vacancy is less than 1 per cent, and is forecast by Canada Mortgage and Housing Corp. to remain tight throughout 2018. Though capitalization rates remain among the lowest in B.C., rents trend are slightly lower than that of most Vancouver neighbourhoods.
Rental vacancy is even slighter in Vancouver Island’s most populous area of Saanich, just north of Victoria, at 0.5 per cent per cent.
Colliers International places the average price per rental suite at $215,000 and rising.
Rental vacancy rate: 2.8 per cent
Average one-bedroom rental: $845
Average price per door: $100,000
Winnipeg’s rental vacancy rate was remained unchanged at 2.8 per cent in 2017 – lowest on the Prairies – according to Canada Mortgage and Housing Corporation. “Winnipeg’s vacancy rate holds steady as increasing supply was offset by growing demand,” the corporation noted. “Strong migration figures have put downward pressure on the vacancy rate.”
Unlike other Prairie cities, Winnipeg’s labour market isn’t as affected by the oil recession. Positive labour market conditions and an increase in employment in 2017 have kept rental demand strong.
With capitalization rates in a healthy 5.5 per cent range and the average city apartment building selling for just above $100,000 per door, Manitoba’s capital offers the best landlord potential on the Prairies, despite a rush of new rental construction in 2017 that added nearly 2,000 new units to the market.
Rental vacancy rate: 0.2 per cent
Average one-bedroom rent: $1,150
Average price per door: $135,000
Kelowna has been lauded as a top-tier investment destination and the city’s multi-family market is no exception. The city’s tech sector is now accounting for $1.3 billion in revenue and playing host to more than 200 companies. The region’s active tourism sector also drives short-term rental popularity through the summer.
The rental vacancy, now at 0.2 per cent, may inch up slightly next year as new developments by JV Development Group and Mission Group add rental supply to the market. Approximately 1,150 new purpose-built rental apartments started in 2017, up almost 140 per cent over 2016.
Kelowna’s Rental Housing Grants program provides up to $320,000 in annual grants for purpose-built rental housing projects.
Based on recent Kelowna apartment building sales, prices are from $105,000 to $166,000 per door and capitalization rates are in the 4.5 per cent to 6 per cent range.
4. New Westminster
Rental vacancy rate: 1.1 per cent
Average one-bedroom rental: $1,330
Average price per door: $288,474
With SkyTrain stations and new Evergreen line access to the Tri-Cities, the Royal City is gaining traction as Metro Vancouver’s “other” downtown. It also has a growing economy, fired by a $1 billion expansion of medical facilities at Royal Columbian Hospital, a booming brewery district anchored by Translink headquarters.
The Real Estate Investment Network recently named New Westminster as one of the top 10 B.C. cities for investment, ranking it No.18 out of 19 for lowest-priced real estate in the Metro Vancouver region.
The average per suite value based on recent sales is estimated at $288,474 by the Goodman Report team at HQ Commercial – the lowest of any municipality north of the Fraser River.
5. East Vancouver
Rental vacancy rate: 0.3 per cent
Average one-bedroom rent: $1,460
Average price per door: $390,349
East Vancouver is Metro’s most in-demand rental market. Mount Pleasant’s burgeoning tech scene, new Emily Carr University of Art and Design campus and proximity to downtown Vancouver is continuing to drive demand at a pace that outpaces supply. The vacancy rate sits at 0.3 per cent, lowest in the Metro region.
Per-suite value for East Vancouver apartment buildings is $390,349, according to HQ Commercial, which noted that this is well below the City of Vancouver average of $556,413.
Rental vacancy rate: 0.6 per cent
Average one-bedroom rent: $1,380
Average price per door: $332,132
Burnaby’s multi-family market is booming, with major development projects centred on The Amazing Brentwood and Lougheed Town Centre SkyTrain stations. CMHC places the city’s rental vacancy rate at 0.6 per cent – less than that of Vancouver’s. A breakneck development pace in the Metrotown area has driven up per-suite values 66 per cent from $332,132 in 2016 to $551,227 in 2018. The steep price of entering the Burnaby market is partially offset by high returns, thanks to Burnaby having the third-highest rent in Canada, according to PadMapper. Total dollar volume from Burnaby apartment sales in 2017 exceeded $260 million, more than any other Lower Mainland municipality, according to HQ Commercial.