The rental market in Victoria is made up of the Primary Market, which is the Purpose Built Rental Market, and what is known as the Secondary Market: properties like condos, townhomes, single-family homes and suites. Statistics are easier to obtain on the Primary Market. The Secondary Market is much more difficult to gather information that shows what is happening in the city right now.
As a company that manages more than 425 rental properties in the Secondary Market, we have some personal on-the-ground insight into what’s currently taking place. Here are some things we are seeing and some points to consider.
We are mainly talking about the condo market in the core neighbourhoods around Downtown Victoria.
Low Vacancy Rate Remains
Overall, the vacancy rate in Victoria is extremely low in our market, as has been reported in the media for a long while now. No matter what is going on in other cities, or in BC, or the rest of Canada, Victoria remains a very popular destination to live for many people. Inflow of people from Vancouver and the Lower Mainland, Alberta, Ontario, the US, plus newcomers to Canada, all contribute to strong demand in our local rental market. Many of these people choose to rent first when moving here, even if they are planning to eventually buy a home in Victoria.
Student Housing Market
Coupled with that demand, Victoria is now back to having students attending on-campus classes who need a rental home. These factors create rental demand, which we do not see fading. But there are different segments in the rental market, and micro neighbourhoods within each segment. If we’re talking about the Downtown Victoria 1 bedroom and studio condo market, that will be much different than the townhome rental market in neighbourhoods outside of the core area.
Increase in Inventory
At this point in, December 2023, we are seeing an increase in rental condos Downtown in the smaller-size range. These are 1 bedrooms/studios that have come on the market and increased supply. This is likely in part due to the recent announcement regarding upcoming short term rental regulations, causing some property owners to get ahead of the changes planned for Spring 2024 and shift into the long term rental market. But it’s also due to the fact some new developments have just been completed and ready for occupancy, like The Pearl Residences on Store St Downtown.
We have experienced this type of increased supply on the market in other years. They have always been short-lived, before the properties are rented. Our own stats show we are currently tailing off 2023 with an increase in condo rental units available and they are taking more days to rent out. We have started to see some price reductions and some incentives added to properties as competition heats up. We expect it to work through the same as other periods where it takes a couple of months for most of the supply to be picked up.
Perception and Micro-Markets
Perhaps more importantly than strict supply stats, there seems to be a perception that rental prices are coming down, that there’s lots of choice, with more on the way. Perception drives markets and there’s been a flurry of news in the media and from the Provincial Government lately about housing announcements. People feel things may be happening. But change is slow, slower than many would like. And the reality of what is actually taking place right now is often very different than what may be perceived by the public. But we are seeing a bit less attendance at showings of rental properties, and some cancellations of showing appointments as people try to jump into competing condos. That is fairly new activity. Our experience says this small sample period will likely not last too long.
Heading into a slower period in December and January will cause a natural pause before we see if there’s any substantial change in the market. Rental prices may move down slightly in some segments of the condo market, but these condos were sold at high values and there are strong reasons why rental prices on newer properties likely won’t move down much. The cost of building new condos and homes in Victoria is higher than in some other parts of Canada due to the high cost of labor, materials and permits.
Owners of condos may decide to sell their properties outright in 2024 if they feel they can’t cover their expenses through the long term rental market. So we may see the sales market supply increase Downtown in 2024 (which has already started happening somewhat – a topic for another time).
In the 2 bedroom+, townhome and single-family home markets, it’s completely different. There is a low supply of larger family-sized rental properties: namely smaller, single-family homes and townhomes in great neighbourhoods. Demand in that particular market is high, with limited supply. If the property is priced well, it will rent quickly. This seems to be the segment of the market the government is trying to address through legislation. Again, change is slower than many would like, so we are a long way off before we’ll be able to measure any changes.
Rented condominium units play a significant role in the supply of rental housing, especially in larger cities in Canada. Record-high immigration and a stable job market in the Victoria region have kept rental demand high. Add in the increased interest in our region from people wanting to move to more livable cities with easy access to outdoor activities, and you have a combination of strong factors that keep rental demand high in this superb city.
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