We hear a lot about the Vancouver rental vacancy rate being very low but what is this metric and what does it really mean? In this post, we shed some light on the matter and what it means for both renters and landlords.
What is the rental vacancy rate?
The vacancy rate refers to the percentage of units that are vacant or unoccupied in a city, region or a given property.
What is the Vancouver rental vacancy rate?
The Vancouver rental vacancy rate has been low for years but started to grow after the start of the COVID-19 pandemic. Figures from the Canadian Mortgage and Housing Corporation show that the apartment vacancy rate jumped from 1.1% in 2019 to 2.6% in 2020 thanks in part to changes in the market as a result of COVID-19.
More supply and lower demand helped fuel the changes in the Vancouver rental apartment vacancy rate in 2020. In the centre of the city, new construction added to the supply while vacancy rates in suburban areas away from the city center declined.
However, these rates don’t tell the full story. For example, the CMHC doesn’t take into consideration rentals owned by individuals, like an investment condo that they would then rent out.
How does Vancouver Vacancy Rate Compare across Canada? (2020)
Vancouver has the lowest residential vacancy rate across Canada while Calgary has the most availability.
Vacancy Rates In Vancouver By Neighbourhood
If you break down the vacancy rate by neighbourhood in Vancouver, then some striking patterns emerge. First, the vacancy Downtown is double or triple what you can see in other neighbourhoods. In UBC, which might be full of students in a non-COVID-19 year, dropped an astonishing 13%.
The vacancy is up across Canada. If you compare Vancouver to another major city like Toronto, we can get even more context and see that it’s not just the West Coast experiencing this phenomenon and that different neighbourhoods are affected in unique ways.
Why is the rental vacancy rate important?
The rental vacancy rate should be of interest to both landlords and tenants. For landlords, it is a key indicator of whether or not a property or overall market is a good investment. For tenants, it provides some indication of how easy or difficult it will be to find rental housing. It will also drive rent rates as it is a metric that indicates the supply and demand situation in any given area.
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How is the rental vacancy rate calculated?
Determining the vacancy rate formula is fairly straightforward. You simply multiply the number of vacant units by 100 and then divide that result with the total number of units. The vacancy rate plus occupancy rate should add up to 100%.
Vacancy rate formula
To illustrate the formula, let’s look at a sample apartment building with 50 rental units, 5 of them unoccupied.
5 x 100 = 500
500/50 = 10% vacancy rate
For the renter, this building is a good place to look for a home.
For the landlord, however, this building’s higher than average vacancy rate suggests this may not be the best investment property. Alternatively, it may signal to the landlord that:
- rent rates are too high;
- building is poorly managed;
- or it is in need of improvements.
The landlord should take steps to remedy the situation in order to fill the empty units and ensure a good return.
What is considered a good vacancy rate?
The answer to this is somewhat subjective and answers vary depending on your source. In general, a healthy vacancy rate is considered to be around 3%. At this rate, tenants will have sufficient options available and rent rates are held at reasonable levels that do not impact housing affordability.
A housing rental report issued by the Royal Bank of Canada in 2019 suggests renters will get a break in 2020. Strong construction activity in recent months and years – specifically, of purpose-built rental apartment projects – suggests a release of new rental units to the market is imminent.
That prediction ended up becoming true and the first half of 2021 is even poised to be a renter’s market.
The bank calculated that Metro Vancouver has a deficit of 3,800 rental units if achieving a 3% vacancy rate is the goal (what RBC considers a healthy rate) and, fingers crossed, we should see this gap closing in 2020 relieving some of the pressure on renters.
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