Rent in Vancouver will keep getting more expensive in 2023

Renters in Vancouver shouldn’t expect to see any relief in rental rates ahead in 2023 thanks to a combination of factors that signal even higher prices ahead.

According to a new report from liv.rent, rent in Vancouver is predicted to continue increasing throughout 2023 due to a variety of factors, including the interest rate, immigration, vacancy rates, and residential construction.

In Metro Vancouver, the average asking rent for an unfurnished one-bedroom unit averaged $2,208 in March. Here’s why that number could look affordable one year from now.

Bank of Canada’s interest rate

We have maintained our policy interest rate at 4.50%.

Find out more: https://t.co/WLSpobJZQb#economy #cdnecon pic.twitter.com/HUT8Hyf1qe

— Bank of Canada (@bankofcanada) March 8, 2023

As of March 2023, the Bank of Canada’s interest rate is 4.5%.

Homeowners who have variable-rate mortgages, or whose mortgages are up for renewal this year, are continuing to face upward pressure in the form of higher mortgage payments. For many homeowners, mortgage payments could now be eating into their disposable income.

Two factors are at play here that have a dual effect on the rental market.

First, landlords will be looking to make up that shortfall by passing on the cost of higher mortgage payments to renters in the form of high asking rents.

Secondly, would-be homebuyers who are waiting for a more advantageous interest rate before they purchase a home are staying in the rental market, further reducing available supply and driving up costs.

Immigration

An alternative perspective on Canada's 2023-2025 immigration targets. pic.twitter.com/Mpg3wKTIa6

— Mikal Skuterud (@mikalskuterud) January 6, 2023

As Canada continues to face a labour market shortage, it’s aiming to bring in more permanent residents in the coming years, adding up to a combined total of 1.45 million by the end of 2025.

This will add to the demand for housing, further putting “upward pressure on rental prices as new immigrants and potential homeowners who opted to rent all compete for rental stock,” said liv.rent.

Vacancy rates

Our 2022 Rental Market Report is out now.

Last year, #rental construction saw its highest rate of increase since 2013.

Yet, growing demand was higher than supply with the national vacancy rate dropping to 1.9%.

This is the LOWEST rate we’ve seen in Canada since 2001.

1/5 pic.twitter.com/S1fTCOR3mh

— CMHC (@CMHC_ca) January 26, 2023

According to liv.rent, rental demand will continue to “surge and surpass supply,” adding pressure to rental prices.

High demand is due to a variety of factors, including increased immigration, potential homebuyers staying in the rental market for longer, and housing demand from students who are returning to on-campus learning.

Residential construction

In 2022, there was an increase in new residential construction projects, but the number of constructions that were actually completed fell from the year prior.

For 2023, future multi-family housing is on its way, but the housing supply will still not match the pace of demand.

“For instance, in Vancouver, constructions that were started back in 2019 are now expecting completion during the middle of 2023,” said liv.rent.

“This means constructions that were started and under construction during the end of 2022 will not be completed on time to meet the demand coming from new immigrants, returning students, and potential homebuyers who remain in the rental market during 2023.”

Delays in construction completions and starts – due to skilled labour shortages, high construction material and equipment costs, and interest rate hikes making it hard to finance mortgages – will add to the pressure on the rental markets across Canada.

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You can visit liv.rent to learn more.