In planning for the up-coming rental season, it’s good to know what sort of weather we’re heading into. Are we talking about a flurry of vacancies or scattered showers of good tenants looking to move?
The data is wonky right now, and so we need to delve a little deeper to prepare ourselves properly.
According to data published on Rentals.ca and Padmapper.com average rental prices have declined across most Canadian cities. In Montreal, Rentals.ca reports a modest increase (4%) year-on-year while noting a month-on-month decrease of 1%. Padmapper’s stats are more depressing; their stats show rents have decreased an average of 13% in the past year.
What’s going on? How can rents go both down and up at the same time?
First, let’s correct for rent-control. As rent controlled units “turn over” and prices are corrected to market standards, rents are inevitably dragged upward. Consider a rent controlled unit (let’s say a 5-1/2 renting for 700$) where the tenants leave. The landlord renovates and rents the unit at today’s (pandemic afflicted) market value (let’s say 1200$ instead of 1400$ in 2019). The statistical average of rent prices across the market may increase even if current market value goes down.
Vacancy rates are high at the moment in Montreal (6%), according to CORPIQ.
This could lead one to understand that current market value for rent has and will continue to come down (say from 1400$ for a 5-1/2 to 1200$), but that rent controlled units turning over can still be corrected upwards.
What’s a landlord to do?
Economic and demographic trends right now will make it difficult to rent units at the same dollar amounts as July 2019. Sorry folks, but the cavalry probably won’t arrive by July this year. Foreign students and immigration likely won’t be back to normal levels by summer, and neither will tourism. Forget about maintaining the rental value of higher-end units in the downtown core and elsewhere. You may have to adjust your expectations downward by a few hundred dollars to attract decent tenants this year.
In lower-income brackets, the same might be true. Low-wage earners have been hit hard by the pandemic (CIBC estimates a 20% unemployment rate). Good tenants for lower-end units will likely be harder to come by this July.
A few tips.
- Go easy with your rent increases this year, especially if your units are rented at market value. If tenant-turnover will force you to review your rents downward, why not work to minimize it?
- Work to keep your tenants happy, especially if they’re paying market value. A vacancy might not bounce the ball in your favor this year.
- Be aware rental season is likely to be a bit difficult. It’s time to think about incentives (like offering one month free) or clever marketing (professional photos). In a rent-controlled environment, these strategies are better long-term than dropping your price.
- Keep your eyes on the rent control mechanisms. If you let your rents get adjusted down, it will be difficult to increase them again. Try leasing your units at pre-pandemic prices and offering a discount.
Don’t forget : The Tribunal Administratif du Logement (or the artist formerly known as the Regie du Logement) released the Calcul 2021 this week.
Find it hereRental & increase season is upon us folks!Data for this article:https://montreal.ctvnews.ca/montreal-rental-vacancy-rate-hits-six-per-cent-highest-in-years-but-prices-don-t-seem-to-be-dropping-1.5277351