Like much of the country, B.C.’s rental market crisis deepened in 2023. The 2023 Canada Mortgage and Housing Corp. (CMHC) Rental Market Survey showed a 30-year-low national vacancy rate of 1.5 per cent and a surge in rents. In B.C., the vacancy rate for purpose-built rental apartment housing was even lower at 1.2 per cent and down slightly from 1.3 per cent in 2022.
Like other parts of the country, B.C.’s strong rental demand was bolstered by chart-busting population growth and a surprisingly resilient labour market. The province recorded an annual population growth rate of three per cent in 2023. A swelling population came with climbing demand for rental units in an already tight rental market.
The Vancouver Census Metropolitan Area (CMA) recorded the tightest rental market in Canada with a notably low purpose-built vacancy rate of 0.9 per cent in 2023. This remained unchanged from the previous year. Abbotsford-Mission recorded a decline in its vacancy rate, down to 0.9 per cent in 2023 compared to 2.1 per cent in 2022. All other large urban areas had vacancy rates below 1.6 per cent except Nanaimo, which saw vacancy rates rise to 2.7 per cent from 2.2 per cent.
Vancouver was the least affordable rental market in the country with the average rent for a two-bedroom increasing by 8.6 per cent to $2,181 and accelerating from the 5.7-per-cent increase seen in 2022. Supply in the rental apartment universe grew by 2.7 per cent during the year but this was insufficient in compensating for higher rental demand in the region given its promising labour market and booming post-secondary student population. Rent for similar units in Chilliwack and Abbotsford-Mission was around $1,400 and the cheapest among B.C.’s largest urban areas. However, both areas recorded some of the largest yearly rent increases.
In the existing home market, Multiple Listing Service sales in Metro Vancouver last month rose 10 per cent from December and were 43 per cent above sales in January 2022. Typically, monthly sales slide by about seven per cent in January, so the monthly figure highlights market strength. On a seasonally adjusted basis, our calculation points to a gain of about 17 per cent, although the official mid-month Canadian Real Estate Association statistics may differ. This is particularly impressive given the deep freeze the region experienced in January. While the pace of growth isn’t fast, the trend is well above the lows seen in January and November of last year and, anecdotally, conditions are vibrant.
Easing mortgage rates, lower prices and expectations of future rate cuts likely drove demand. The average home price in the region rose 1.6 per cent to $1.16 million after a 3.6-per-cent December drop, but slipped on a seasonally adjusted basis.
Declining interest rates and high population growth are likely to lift sales in coming quarters and the key question is if prices will follow. This will partly reflect housing inventory, which is currently at a level in line with market balance but expected to tighten with rising sales. That said, affordability will remain a key challenge with the average price up 20 per cent from pre-pandemic levels. It will be cushioned in part by higher wages and the spectre of lower rates. This will likely keep price growth modest, as significant price gains would push buyers out of the market if they are not offset by interest-rate cuts. We expect rising sales through 2024 but anticipate prices to remain steady through mid-year before moving up in the second half of 2024.
Bryan Yu is chief economist at Central 1.
