Canada Property prices are booming attracting overseas investors buying property in the private rental sector and nowhere more so than British Columbia, in particular Vancouver.
British Columbia operate a rental cap imposing a maximum annual rent rise of 2.9 per cent, but it seems that landlords have found a way around this to benefit from the increasing demand for rental accommodation in the city.
By using fixed term rental agreements of one year the tenant must agree to vacate the property at the end of the contract. If they wish to stay a new agreement must be negotiated, allowing the rent to be set at whatever level is agreed, therefore circumventing the rental cap. Alternatively a new tenant can be easily found at the higher rent level.
Incentives have been offered to developers to construct new rental properties, but they are not required to ban fixed term tenancies, which can only be done by the provincial Residential Tenancy Branch.
Tenants who sign the clearly worded fixed term tenancy agreements must leave at the end of the contract and have little recourse as strong competition for rental properties mean the rent level is likely to rise steeply each year.
Landlords have insisted that fixed term agreements are not widely used by British Columbia landlords.
CEO of Landlords BC, David Hutniak, also stated: ‘Both parties know the contract ends at a fixed date and the tenant ends their tenancy. The new contract will typically be at market rent, which is understandable. The 2 per cent plus CPI restriction does not apply in this scenario.’
Rents in the West End and Downtown districts of Vancouver rose by 7.1 per cent from 2015 to 2016 according to a survey by Canada Mortgage and Housing Corporation with the vacancy rate falling to just 0.6 per cent.
Between 2015 and 2016, rents in Vancouver’s downtown and West End rose 7.1 per cent, according to Canada Mortgage and Housing Corporation’s fall 2016 survey, while Vancouver’s vacancy rate fell to 0.6 per cent.
Rental increases are no solely down to fixed term contracts however. The rise in short term rental websites such as Airbnb are another important factor. On June 7 the site InsideAirbnb.com showed 3,179 listings for entire houses or apartments and 1,399 private rooms.
Andy Yan, acting director of the city program at Simon Frazer University and an urban planner, said: ‘You’ve got rents going up because supply went down: when supply got cut by Airbnb, by units not being built, and the units that were built were very high-end.’
All of this means that despite rising prices in Vancouver, rental yields still remain strong and the vibrant city may be one that investors want to consider.