Builders, contractors may look at rentals
December 23, 2019
Victoria new purpose-built rental building sold for $344,000 per suite. - Colliers International
More than 72,800 rental apartments were under construction in Canada at the end of 2019—the highest rate in 30 years, according to Canada Mortgage and Housing Corp. (CMHC). Approximately 7,500 units are underway in Greater Toronto.
Rental demand is increasing due to higher house prices and the mortgage stress test—which deters younger buyers. Analysts note this is helping to fuel the rental construction boom. But there are other reasons some developers may switch from building condos to purpose-built rentals.
A CMHC-backed program offers low-interest, long-term loans to rental developers. Currently, rates are between 1.5 and 3 per cent, with loans locked in for 10 years. The program has been so popular that the government is increasing funding.
A second reason is that developers may not have to wait for rent collection to cover their costs. A number of real estate investment trusts (REITs) and pension funds are actively seeking purpose-built rental buildings. In Metro Vancouver at least four new multi-family rental buildings sold to Toronto-based REITs in the second half of 2019 alone.
“We expect the rental market to continue to be undersupplied overall in Canada in 2020,” said Ben Myers, president of Bullpen Research & Consulting.