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Falling prices lead to lower rents.

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Even after years of falling real estate prices in Miami it’s still cheaper to rent than to buy according to this article in the Wall Street Journal, sent in by bcbuds.  As prices are falling so are rents.

It’s a dilemma for owners, do you try to wait out a recovery and pour money into the condo you’ve got rented out at a loss, or do you stop the bleeding and sell in a down market?  Many are choosing to wait out the market and hoping for a recovery soon.

…But that has created a new, predictable situation. “Rents are falling,” says Miami broker Leslie Cooper. “You and your brother and everyone else is trying to rent your new condo out. So no wonder. But the rents won’t even cover your costs.”

I looked a number of fabulous condos in new developments on Brickell Avenue in downtown Miami. Their prices had been slashed drastically from peak levels. Some are now in forced sales.

You can get a two-bedroom condo in some places for $400,000 or less. And that’s considered a great deal.

Of course the problem is that even these reduced prices aren’t justified by the rental income.  The article goes on to examine the numbers- even if you aren’t renting the money and have the $400k cash interest free to buy one of these condos it’s still a losing proposition in a post-boom era of property depreciation.

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watching the market

If you are looking to rent on the North Shore the best source for ads (in my experience) is the vannet classifieds (the classifieds for the North Shore News), they are online too. That is where the landlords advertise……at market prices (not the flyers you see people taking on Craigslist to see if they can find someone new to Van area who does not know the market and how much to pay….).

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ReductiMat

Wow, I'm at a bargain-low of 32. Perhaps I need to revisit purchasing this suite!

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Drachen

Reductimat

37 here.

I live in a 1/3 share of a house but I know the value of the house and what the other tenants pay. What's your number?

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Drachen

A little music to get you through your day.

http://www.videosift.com/video/The-Housing-Bubble…

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freako

This is a fallacy, as we have previously discussed. If an owner sells and becomes a renter, his old residence gets added to the rental pool. One more renter, one more rental unit. That is how the theory goes, and I have often argued the same when somebody tries to argue that "rents will go up when prices fall because more people will buy and there will be fewer rental units availalbe" Moronic reasoning aside, the rents in most speculative U.S. markets have fallen, the notable exception being San Francisco. Basically, the more overbuilding that took place, the more rents drop. You are both correct. Falling prices don't directly lower rents. The high prices leads to overconstruction. The falling prices cause "investors" to make better use of their resources (which means no more empty places), which leads to increased rental… Read more »

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ReductiMat

Some good chart-porn over at NYT.

Interesting to note is that I am off the scale (as mentioned previously I live in a suite in Yaletown).

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patriotz

Well sure that's an attempt to defraud the mortgage holder and it can be challenged.

But for an arms-length renter paying the going rent, you stay.

In fact during the 80's bust it was common for the bank to pay the tenants to get out voluntarily so they could sell the house as a move-in. As the rental market was soft is was a good deal for the tenant.

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Me2

Umm the above isn't completely true, just before you foreclose sign up a 3yr lease at $50/month with your buddy and see how that contractual obligation holds up in court.

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patriotz

Actually, rents in a lot of U.S. cities have increased because of the foreclosure crisis.

That's because the foreclosed units are sitting empty, reducing the total supply of shelter. This will work itself out when the units become occupied again (whether by renters or owners doesn't matter).

BTW in BC tenancy rights are not affected by a change in ownership, including foreclosure. The new owner assumes all contractual obligations of the old one. Thus you will not see tenants evicted due to foreclosure, and I think you will not see large number of foreclosed properties sitting empty here.

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blueskies

Wonder if they really really needed a down payment for their pre-sale…..

isn't selling your first born a prerequisite for home ownership with the second payment being an arm and a leg?

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Coco

Actually, rents in a lot of U.S. cities have increased because of the foreclosure crisis.

Renters can't escape housing foreclosure crisis.
http://www.usatoday.com/money/economy/housing/200…

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Gonebabygone

Amazing what people will do. Is this what Vancouver has come to? Wonder if they really really needed a down payment for their pre-sale…..

http://www.nationalpost.com/news/canada/story.htm…

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Anonymous

My philosophy about rent is pay as little as possible. The indoors,I can fix up myself, and it comes with me when I leave. My other philosophy is: if I dont make good money, everybody else makes even less money off me. Goes around, comes around. Me first. Got to think like a greedy corporation.. or landlord.

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richard

Young residents look for greener pastures. not here.

"Roach noted that when asked, on average, 90 per cent of British Columbians said they expect to be living in B.C. five years from now.

For 18-to-24-year-olds, however, that number was 74 per cent. And 26 per cent said it's unlikely they'll still live in B.C. five years from now, up from the 12 per cent who said the same in the foundation's 2006 survey."

and

"The Lower Mainland, Victoria and Kelowna are all areas that have seen dramatic increases in housing prices, without commensurate increases in incomes that would pay for such housing.

"This is not a Tokyo or London or New York," Finlayson said, where there are lots of high paying jobs."

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jesse

"the something news are open market but long term tenancy is RTA controlled."

There is a clause in RTA that allows a landlord to raise rent to market rate if they can prove the current rate is below market.

If what you say is true then why are rents not raised the maximum allowable on so many places? It's not that rents have become so much more expensive, it's that rents have been systematically held below inflation for existing tenants for years. One should ask why this practice is so prevalent. And don't say because landlords are dumb!

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jesse

aetakeo, I think the wide variance in asking rents has always been that way. You could also be seeing big differences in carrying costs showing up; not surprising given the huge runup in the past 8 years and if true doesn't bode well for those asking too much. They will be left with crappy tenants and will pay for it eventually.

If you're a low risk to default you should be able to command a lower rent. If a landlord doesn't offer you a discount it means: they have lots of competition from other good candidates, they are ignorant good tenants command a discount, or you are a deadbeat and don't know it.

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bdk

http://www.gvrd.com/real_estate_rentals/index.htm…

That government site links to several sites..

I didn't mean to say people that can't find rentals have bad credit scores, I just mean there must be more to the story since I have had my eyes trained on the downtown rental market for several years and don't see where people that complain that they can't find places are coming from.

Unless you're bragging about how much pot you smoked while feeling up a hooker the night before on your cel phone during the viewing or raising a similar red flag it shouldn't be a problem finding something.

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aetakeo

Pope, do know if CMHC data on rents in Vancouver includes tenants in suites or just what's on the market? These two rates are sliding away from one another, I think. It's one thing to stay in a place for many years, and another thing to find something new, since the something news are open market but long term tenancy is RTA controlled. And the open market seems schizophrenic on rents right now. My mom's old building was one of those that evicted for condo conversion, and when we were looking we saw 2 bedroom comps over a *thousand* dollar range. COMPS – same neighborhood, same amenities, everything. It was weird.

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Warren

CashingOut,

That is the best way to find a place to rent. Most people I've talked to who have a great deal found it that way. Its also a great time to check out the neighbourhood. Try it on a Friday night to see how busy/loud the area is, etc.

For Yaletown and downtown, it is more difficult. A lot of people post "for rent" posters in the mail area or lobby of the building. Doesn't help too much if you're on the outside looking in of course…

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bdk

If you go to promptons website they will email you a list of available units, which are close to or in yaletown.

downtown suites has pictures and specs of their units, bruce ward does too as does Unique Accomodations.

Those are 3 good sites to start with.

Walking around and the newspaper are the best ways to find decent prices. If you don't mind paying more and having competition then go with craigslist.

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aetakeo

Some families having trouble with rents have an income to space problem, not a credit or pet problem. I've had friends leave the province for this reason.

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CashingOut

In this comment thread:

"There’s more anectdotal info on what people are paying for rent in Vancouver here:

2008/01/2-bedroom-rents-up-41-per-month.html"

A lot of people suggested walking around the neighbourhood you wanted to rent in as a good way to find out the 'real' market for rents. Problem is I want to rent in yaletown, and I never see "For Rent" signs out. I think it's probably a strata by-law. What's the best approach in that case? Craigslist? Property Management Companies?

Also, if you're a good prospective tenant, perfect credit, good reference, stable employment etc. Will a PM company do the leg work for you and call you when suitable properties come on the market?

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crabman

Pope and Patriotz,

I agree with all your points and would add one more. When prices are going up, more people are content to leave their "investment" empty (temporarily reducing supply). Who needs the hassle of tenants when your condo has gone up a few $100k? OTOH, when prices are flat and falling, you need that income to cover your costs and losses, and many of those places go back into the rental pool.

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doug

North Shore 3 bedrooms are pretty pricey, but a good place to look is here –

http://classified.van.net/classified/classified.n…

… then search in the North Shore News

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andrew

offtopic, but i am looking for a clean 3 bedroom on the North Shore. It's much more difficult than i thought.

I have had to settle for the North Shore as that is where my son's behavioral interventionists are located.

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