Key Takeaways:
- Kelowna, B.C. has the highest vacancy rate of any Canadian metropolitan area, with a rate of 6.4% as of the latest report.
- The increase in vacancy rate is attributed to a combination of factors, including an outflow of residents due to affordability and changes to Canada’s immigration policies.
- Youth unemployment and increased supply of rental units are also major contributing factors to the high vacancy rate.
- Despite the high vacancy rate, rents have not fallen and have instead edged up, with the average one-bedroom rent increasing to $1,596.
- The rising rents are attributed to low renter turnover and the high costs of newly-constructed rental buildings.
Introduction to the Rental Market in Kelowna
The city of Kelowna, B.C. is experiencing a significant shift in its rental market, with the vacancy rate soaring to the highest of any Canadian metropolitan area. According to the Canadian Housing and Mortgage Corporation (CMHC), the vacancy rate in Kelowna has increased to 6.4%, up from 3.8% last year. This increase is attributed to a combination of factors, including an outflow of residents due to affordability and changes to Canada’s immigration policies. Shiva Moshtari Doust, B.C. lead economist with CMHC, notes that the outflow of non-permanent residents, such as international students and temporary foreign workers, has softened the demand in the market.
Factors Contributing to the High Vacancy Rate
The outflow of residents is not the only factor contributing to the high vacancy rate in Kelowna. Youth unemployment and increased supply of rental units are also major contributing factors. According to Statistics Canada, Kelowna’s unemployment rate rose to just over 11% in November, the highest jobless rate in all of Canada. Additionally, the supply of rental units has increased sharply in the past year, with 1,300 new units added to the rental pool. This increase in supply has led to a surplus of available units, with many landlords competing for tenants and offering incentives to fill their properties.
The Impact of New Rental Buildings
The newly-constructed rental buildings in Kelowna are also playing a significant role in the rental market. These buildings have higher costs, which are being passed on to tenants in the form of higher rents. According to Moshtari Doust, the new buildings have higher costs, and as a result, landlords are charging higher rents to prospective tenants. This is contributing to the rising rents in Kelowna, despite the high vacancy rate. For example, the average one-bedroom rent has increased to $1,596, up from $1,509 last year.
The Economics of Supply and Demand
The usual economics of supply and demand are not playing out as expected in Kelowna’s rental market. Despite the high vacancy rate, rents have not fallen and have instead edged up. This is attributed to low renter turnover, which means that landlords are able to increase rents when a unit becomes available. Additionally, the high costs of newly-constructed rental buildings are also contributing to the rising rents. Jeff Kennedy, CFO of Troika, notes that the company is offering incentives to fill their new rental building, but the rents are still higher than last year.
The Future of the Rental Market in Kelowna
The future of the rental market in Kelowna is uncertain, with new builds expected to slow down. However, Kelowna remains one of the fastest-growing cities in Canada, and demand for rental units could spike again. Kennedy notes that the city needs to continue to keep up with the demand for housing, and that the dynamic tenant demand will continue to increase. As the city continues to grow and develop, it will be important to monitor the rental market and ensure that there is a balance between supply and demand.
Conclusion
In conclusion, the rental market in Kelowna, B.C. is experiencing a significant shift, with a high vacancy rate and rising rents. The outflow of residents, youth unemployment, and increased supply of rental units are all contributing factors to the high vacancy rate. The newly-constructed rental buildings are also playing a significant role in the market, with higher costs being passed on to tenants. As the city continues to grow and develop, it will be important to monitor the rental market and ensure that there is a balance between supply and demand.