Vancouver rents seen rising faster than home prices

Thursday, July 31st, 2014

Tara Perkins

Rents are poised to grow faster than home prices in Vancouver, rating agency DBRS predicts.

In the long run, the rental market should move along with the housing market in any given city, DBRS suggests.

But, as you can see in the chart below, home prices have grown much more quickly than the cost of renting in Vancouver over the past decade or so.

The second chart shows that the same thing happened – though more quickly – in the United States before the market there crashed, bringing prices back in line.

But DBRS does not foresee a crash occurring in Vancouver. Rather, it expects that a growing number of people will choose to rent rather than buy, driving rents up and softening the outlook for house prices. “It is more than likely that rental rates will increase at a faster rate than that of home prices going forward,” the rating agency says in a report. “Furthermore, a major correction seems unlikely given the long-term stability of the Vancouver market.”

It points out that Vancouver is Canada’s most expensive city, with prices having almost doubled since 2005. But, in DBRS’s opinion, the lack of available land to develop homes on, coupled with population growth, should help insulate the housing market from shocks. Vancouver’s population has grown 47.8 per cent since 1981, while New York’s has grown 17.8 per cent, it points out.

Vancouver home prices recently went through a slowdown, growing by only about 1.7 per cent per year for the post-recessionary period between 2008 and 2013, DBRS says. But they have rebounded recently.

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