Renting in Vancouver ‘a good deal’

There’s an article on the CBC website about a CMHC statement that renters in Vancouver “get better value for their money than almost anywhere else in the country”. It’s almost like they’ve taken the common ‘housing bubble’ argument and turned it upside down. One way to look at the disparity between property values and rent prices is to say that there is no support for current prices in rental values. Another way to look at the same issue is to say that renters are getting a great deal since rental costs are nowhere near purchase costs.

CMHC analyst Brian Yu said rents in Vancouver are still comparable to many other cities in Alberta and Ontario.

He also noted that rents don’t reflect the fact that homes in Vancouver are the most expensive in the country to purchase.

He cited the example of a two-bedroom condo in Calgary that costs almost as much to rent as it does in Vancouver, even though real estate prices in Vancouver are up to 40 per cent higher than the Alberta city.

As he points out, one of the reasons that rent is lower in Vancouver is that we have legislated rent controls, while Alberta does not. Certainly this would play a part in the discrepancy, but I don’t think you can discount the income side. If rent in Vancouver were to increase 40% to make up for that difference how many people would stay here with current income levels. How much harder would it be to find people to fill those entry level jobs?

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solipsist
solipsist
13 years ago

Property taxes in sum are equal to estimated local government spending.Property taxes in Vancouver are relatively "cheap" as compared to the Golden Horseshoe in Southern Ontario. Part of that is – it costs much less here to maintain roads and public buildings thanks to the more temperate climate.I have noticed a fair number of new pot-holes in the roads this last couple of months, and have been wondering if it is the weather. Montreal gets pot-holes that can destroy your car.There is an idea around the "justice of climate" that I will be getting into over at vancouver (un)real estate as soon as I can.

patriotz
patriotz
13 years ago

Unless the city is reducing tax rates, it stands to reason that property taxes are also at an all time high.Property taxes in sum are equal to estimated local government spending. The total tax take has nothing to do with property values. Yes that's right.Nominal property taxes are indeed at an all time high, but that's just because nominal spending is at an all time high due to inflation and population growth.The tax rates are set each year to get the required revenue from the current assessment base. They can, and do, go down when property values rise faster than spending. Which happens quite often in Vancouver.

RentingSucks
RentingSucks
13 years ago

If prices don't come down in the next couple years I'm going to have to take a long hard look at whether I'm going to continue living here or not and how important it is for me and my families well being to own a house.Also I've hit a point in my experience/salary where if I don't buy a house I have lots of money for just about everthing. I could continue to sock away bucket loads for retirement and probably even put my three kids through college (15 years away or so) without much difficulty.Although the bubble makes you realize the problem with not being in the market at certain points in time. Although I saw the 90's too and being in the market wasn't so hot either and even downright painful if you had a non appreciating leaky… Read more »

Pondering
Pondering
13 years ago

If rents rose to match the property values you would see a mass exodus. Most people can't afford to spend 70% of their monthly income on housing, period.

Warren
Warren
13 years ago

This is an interesting perception and I think, only exists in certain demographics.I'd say its the same as the poor/rich situation. Common thinking is that renting = poor = lazy/loser/stupid etc. because "Hey, this is capitalism, smart people who work hard make lots of money, everyone else is a poor idiot".I'm with you though. I own a small place that I rent out, and rent with my girlfriend in East Van. I also drive a $500 car, because I like not being tied to big debt. Its all an image thing, drive a SUV, live in a Yaletown condo, etc.I should say at the same time that I'd be more than happy to buy again downtown when prices make sense to do so.

loki
loki
13 years ago

The negative stigma attached to renting is not helping.This is an interesting perception and I think, only exists in certain demographics. Hopefully for homowners that have bought recently that demographic is the people that can 'afford' todays prices and want to buy.Though I could afford to buy, I choose to rent. I do this not only because I believe RE is currently overvalued, but because I appreciate the flexibility that renting gives me and the extra money in my pocket/ rrsps/ savings/ etc. I love to take time off from work and travel, and I love the secure feeling that I get from having enough cash to live for a year if my job were to end, or if I just wanted a change. To each their own.I am fortunate enough to have a very good property manager, so instead… Read more »

Warren
Warren
13 years ago

Hey Rob,Rents are climbing, but at a snail's pace.I can't believe they are talking about clawing the grant back now, when properties are at record levels. Unless the city is reducing tax rates, it stands to reason that property taxes are also at an all time high. I certainly hope they keep the grant for Senior Citizen homeowners.The negative stigma attached to renting is not helping.

Rob Chipman
Rob Chipman
13 years ago

2 points:1- In my experience rents are climbing.2- I heard on Bill Good this morning arguments why the Homeowners Grant should be clawed back. One reason was to give help to FTBs/renters who can't afford to buy. I couldn't help but think of the argument that its a good deal to rent in Vancouver, which has been ably made many times on the blogs.

digi
digi
13 years ago

Warren: Very true – I should have been more clear, I was refering specifically to a case where the economy takes a major dive or we go into a recession.Clearly during a boom a real estate investment will increase dramatically in value just as it can drop dramatically in a bad bust.It all comes down to personal situations and what you're doing with the money thats not going into housing costs. It's not been uncommon to have a property that you are buying with a decent down payment (and taking on upkeep responsibility for) to cost less than market rent. I guess it depends on what you think the potential upside/downside of our economy is."past results are no guarantee of future returns"

Warren
Warren
13 years ago

digi,I don't want to come off sounding like a bull, because I'm not, but that's obviously a very slanted view of things. In a RE boom your net worth could be increasing $5k a month instead of shelling out $1.5k on rent and having it do nothing.

digi
digi
13 years ago

Another interesting difference between rental prices and owning costs:Renting means if the economy takes a dive you can move easily to take advantage of lower rents.When you buy you owe what you bid to pay no matter what the economy does, and it becomes more difficult to sell to recoup losses. If interest rates go up the squeeze is even greater when you need to renew your mortgage.

digi
digi
13 years ago

Rent prices are very hard to track – there is anecdotal evidence that prices are up, but I wonder how much of that is based on asking prices by amateur condo owners on Craigslist?

Warren
Warren
13 years ago

Sorry if it was not clear. I'm referring to the extra cost to heat and cool a home in "extreme" climates like Calgary or Toronto, vs. Vancouver. Its not the same as rent, but should be factored in to any financial consideration. Combined with our lower electricity rates. For example, I have friends who just moved from Ottawa routinely spending $250/month in the winter to heat a 2 bedroom townhouse. Please ignore today's weather. 🙂

ReductiMat
ReductiMat
13 years ago

Can you elaborate on what you mean by $100/month difference?

Warren
Warren
13 years ago

Are there any affordability indexes on rent like what RBC does with mortgages?I think there is a slight inherent price advantage to renting/owning in BC vs. for example AB or ON with our milder climate and cheaper energy costs. That being said, maybe $100/month difference.This highlights that our real estate is overvalued (thanks professor), but does this mean real estate is at stable levels in Calgary or Toronto? Say it ain't so.