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The residential rental market


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#521 Nparker

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Posted 26 October 2018 - 08:52 AM

Jack Knox has a great article on the state of the rental scene in today's TC.

...“Governments need to understand that developers can build condos, commercial projects or purpose-built rentals for the same building cost,” Ash says. There’s no way we’ll see mass construction of residential rentals without incentives that make building and managing them a worthwhile option. They must also be profitable enough to make lenders comfortable putting up the capital. And remember that not all developers are Vancouver gazillionaires using $50 bills to light $100 cigars, that the mom-and-pops need to be taxed like other small businesses. “If they really want change,” Ash says, “they need to make it financially viable for business to operate.”...

 

https://www.timescol...gers-1.23476880


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#522 spanky123

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Posted 26 October 2018 - 09:07 AM

^ The article makes some very good point which often get overlooked by people outside of the business.

 

If you have money you can do several things with it. The safest bet is to park it in a GIC which right now will pay you 3.5% to 4% on a term of 5 years or less. Close in safety are pref shares from banks or insurers which will yield closer to 5%. If you are willing to take a little more risk then 5.5% to 6% is also achievable. Over the next year, those yields will slowly drift up as interest rates increase. 

 

So what then is a fair return on investment for someone who undertakes the effort to purchase and rent real estate? Even in an environment where real estate prices are increasing, you could make an argument that an 8%-10% return is fair given the time, effort and risk involved when compared to alternative investments. If investors can't see a path to those figures then they will not invest.



#523 Nparker

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Posted 26 October 2018 - 09:20 AM

Making a profit is a form of colonial oppression and hate. Just ask anyone on LeftCouncil©


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#524 rjag

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Posted 26 October 2018 - 09:32 AM

 

 

So what then is a fair return on investment for someone who undertakes the effort to purchase and rent real estate? Even in an environment where real estate prices are increasing, you could make an argument that an 8%-10% return is fair given the time, effort and risk involved when compared to alternative investments. If investors can't see a path to those figures then they will not invest.

 

And yet you'd be lucky to get a 3-4% cap rate on a rental building these days

 

Colliers Q2 report on Cap rates show high rise multi family in Vancouver getting between 2-3% and low rise 2.5-3.5%

 

Victoria is showing 3.5-3.75% and 4-4.25% for the same


Edited by rjag, 26 October 2018 - 09:33 AM.


#525 spanky123

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Posted 26 October 2018 - 10:01 AM

And yet you'd be lucky to get a 3-4% cap rate on a rental building these days

 

Colliers Q2 report on Cap rates show high rise multi family in Vancouver getting between 2-3% and low rise 2.5-3.5%

 

Victoria is showing 3.5-3.75% and 4-4.25% for the same

 

If real estate prices are increasing then at those rates you are holding the property and hoping on the appreciation. If real estate prices are flat then you are losing money. 



#526 Mike K.

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Posted 26 October 2018 - 10:09 AM

So long as rent covers your expenses you’re just holding an asset that will eventually appreciate in value. You’re also diversifying your portfolio.

Think if real-estate like gold. You don’t buy gold to sell in a week, typically. It’s a long term stable asset that over the long term will appreciate well above inflation.

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#527 N E Body

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Posted 26 October 2018 - 10:11 AM

^which is just the reason we have a ridiculously low vacancy rate because of over regulation that prevented apartments from being built for 30 years.  Government is solely to blame for the lack of rentals and they don't get it.  Too much regulation and the private sector invests their money elsewhere

 

I'm curious as to what you mean by over regulation. Which regulation(s) are you talking about?

 

My guess would be a lack of government incentives, tax or otherwise, and a better return on condo developments would be the reasons why no purpose built rentals were built between 1981 and 2001.



#528 spanky123

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Posted 26 October 2018 - 10:13 AM

I'm curious as to what you mean by over regulation. Which regulation(s) are you talking about?

 

My guess would be a lack of government incentives, tax or otherwise, and a better return on condo developments would be the reasons why no purpose built rentals were built between 1981 and 2001.

 

And the fact that the capital gain on your condo sale is taxed at 25% while passive rental income would be taxed at greater than 50%


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#529 tjv

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Posted 26 October 2018 - 12:02 PM

I'm curious as to what you mean by over regulation. Which regulation(s) are you talking about?

 

My guess would be a lack of government incentives, tax or otherwise, and a better return on condo developments would be the reasons why no purpose built rentals were built between 1981 and 2001.

Basically almost everything in the residential tenancy act.  Capping annual rent increases, low security deposits, inability to get rid of tenants who are disruptive or who don't pay rent are just for starters

 

I don't believe government needs to give any incentives, tax or otherwise.  Its an investment and you are putting up good hard capital and you expect a solid return on your investment.  If rentals don't offer it, then there are plenty of other investments that do.  The result is apartment buildings don't get built for 30 year odd years and people invest elsewhere.  I ran the numbers on a rental investment and quickly tossed it aside and continued reviewing other possibilities.  I am here to make a profit not provide housing


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#530 N E Body

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Posted 26 October 2018 - 12:38 PM

Basically almost everything in the residential tenancy act.  Capping annual rent increases, low security deposits, inability to get rid of tenants who are disruptive or who don't pay rent are just for starters

 

I don't believe government needs to give any incentives, tax or otherwise.  Its an investment and you are putting up good hard capital and you expect a solid return on your investment.  If rentals don't offer it, then there are plenty of other investments that do.  The result is apartment buildings don't get built for 30 year odd years and people invest elsewhere.  I ran the numbers on a rental investment and quickly tossed it aside and continued reviewing other possibilities.  I am here to make a profit not provide housing

 

Except that rent caps never arrived until 2003 and it was tax incentives that gave us most of the 1970s rental stock that is available in this city... not to mention the tax incentives and government programs after the war (WW2) that gave us the first wave of solidly built 3 storey walk-ups from the early 50s.



#531 tjv

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Posted 26 October 2018 - 01:51 PM

^Please provide documentation to back up what you are saying.  A quick google search confirms

 

A month or so later, in February, 1974, the NDP government passed a new Landlord and Tenant Act. Two of its regressive features were the establishment of a Rentalsman and abolition of the Rent Control Act. The Rentalsman was given authority to set future rent increases.

 

Finally, after we presented a petition with 25,000 names to the provincial government, it acted and took the rent-setting authority out of the hands of the rentalsman and placed it in the hands of a Rent Review Commission. Rent increases for 1975 were also limited to 10.6%.

 

http://themainlander...m-1968-to-1978/



#532 sdwright.vic

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Posted 26 October 2018 - 03:18 PM

10.6% of $400.00= $43.00 (roughly)
2.5% of $2000.00= $30.00

Just for comparison on allowable rent increase then and now.
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#533 spanky123

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Posted 26 October 2018 - 03:37 PM

10.6% of $400.00= $43.00 (roughly)
2.5% of $2000.00= $30.00

Just for comparison on allowable rent increase then and now.

 

Price of gas was $0.38 a gallon in 1973 as well!



#534 sdwright.vic

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Posted 26 October 2018 - 03:48 PM

Now that an increase! At least the rents went down (kinda, sorta, maybe)! 🤣
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#535 sdwright.vic

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Posted 26 October 2018 - 03:49 PM

Price of gas was $0.38 a gallon in 1973 as well!


Or better know as $0.095 a liter!
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#536 N E Body

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Posted 26 October 2018 - 04:57 PM

^Please provide documentation to back up what you are saying.  A quick google search confirms

 

A month or so later, in February, 1974, the NDP government passed a new Landlord and Tenant Act. Two of its regressive features were the establishment of a Rentalsman and abolition of the Rent Control Act. The Rentalsman was given authority to set future rent increases.

 

Finally, after we presented a petition with 25,000 names to the provincial government, it acted and took the rent-setting authority out of the hands of the rentalsman and placed it in the hands of a Rent Review Commission. Rent increases for 1975 were also limited to 10.6%.

 

http://themainlander...m-1968-to-1978/

 

"For example, a 10% annual increase was granted for all apartments in B.C., Canada and ac- cording to statistics from the Rentalsman’s (rent control commissioner) office, of the 1,319 landlord applications for cost pass along rent increases in excess of 10% that were decided in the 1975-1979 period, fully 1,014 or 77% were granted."
 

http://www.walterblo...sh_columbia.pdf

Real rent control was not introduced until the Liberals came to power in 2001 when 2% + inflation was brought into law.

If the fake rent control of 197 had actually stifled rental construction in the 70s then the 1000s of units built after 1974 would never have made it past the planning stage.

To the best of my knowledge, rent control was fully abolished in 1979.

(on edit)

"Rent controls were abolished. Landlords were given the right to evict tenants without cause."

https://thetyee.ca/O...rs-Fought-Back/


Edited by N E Body, 26 October 2018 - 05:07 PM.


#537 Victoria Watcher

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Posted 26 October 2018 - 05:03 PM

knox's article does indeed fail to mention asset appreciation.



#538 tjv

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Posted 27 October 2018 - 08:05 AM

^^  ok, this is what I did find:

 

Rent control policy in B.C. has become increasingly restrictive with successive governments. In the 1980’s the Bennett government allowed unlimited rent increases, with tenants only able to challenge rent increases above 15%. In the 1990’s the Clark government continued to not limit the amount of a rent increase, but required the landlord to justify increases in response to all tenant challenges. And in 2002, the Campbell government introduced the most stringent rent controls establishing limits on rent increases. 

 

http://www.bcchamber...-increases-2014

 

Now I don't have any stats to back this up, but it seems to me that the overall vast majority of apartment buildings were built in the 60s and 70s.  I can't recall any apartment buildings built here in the 80s, 90s and 00s.  Part of the reason I can see so many apartment buildings built during the 60s and 70s as that was when we had the baby boomer generation come of age and there was a huge demand for rental housing

 

I also seem to recall a time in the 90s when apartment vacancy was high and landlords were offering incentives to move in for a year and get 1 months free rent, but I forget the specifics.  Obviously if demand was that poor then, that is also another reason why we didn't see a lot of apartment construction.  I seem to recall when I rented in the 00s it was relatively easy to find good quality, reasonably priced rentals

 

Obviously those my personal observations, but anyone is free to tell their thoughts



#539 Mike K.

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Posted 27 October 2018 - 08:17 AM

In many ways it’s no different today than it was in the 00’s (when we also had very, very low vacancy rates but builders had no or limited access to capital to build, or rezonings were too arduous) for acquiring a place. But today the costs are much higher and the issue of finding a place has become a political one. Funny how things reversed.

In the mid-00’s Quadra Pacific wanted to build two or three rental towers in James Bay on parking lots of their (then) rental towers (since all sold). City council, despite the low vacancy, voted against them. So efforts had been made to build new inventory but council of the day wasn’t having any of it. In fact the situation was so bad that Devon Properties started publicly challenging the status quo and warning what could happen if council did not allow new supply to materialize. And what could happen happened. Now we have a so-called “crisis.” Although it’s not really a crisis but it is a situation that can be politically usurped in multiple ways.
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#540 tjv

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Posted 27 October 2018 - 02:19 PM

^I don't remember ever having an issue finding a place to rent in the 00's and I moved in 2001, 2003, 2004.  I am going to assume that the vacancy rate wasn't nearly as low as it was now, but I also don't know the exact numbers.  I fully agree we have a ultra low vacancy rate now and its hard to find a place



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