Rental signs are popping up everywhere in Kelowna, B.C., where the vacancy rate has soared to the highest of any Canadian metropolitan area.
“Supply increased, demand decreased and as a result, we are seeing a softer rental market,” said Shiva Moshtari Doust, B.C. lead economist with the Canadian Housing and Mortgage Corporation (CMHC).
According to CMHC’s annual rental market report, Kelowna’s vacancy rate is now sitting at 6.4 per cent, up significantly from 3.8 per cent last year.
Moshtari Doust said a contributing factor is the outflow of residents due to affordability and changes to Canada’s immigration policies.
“Mostly non-permanent residents are the renter population and that outflow really softened the demand in the market,” she said.
“Non-permanent residents being international students, being temporary foreign workers, as well as an outflow of interprovincial migration to mostly the neighbour province of Alberta, due to mostly cost of living and affordability reasons.”
Youth unemployment and increased supply are also major factors, according to CMHC, and in Kelowna the impact is perhaps even greater.
According to Statistics Canada, Kelowna’s unemployment rate rose to just over 11 per cent in November.
It’s the highest jobless rate in all of Canada.
The supply of rental units has also increased sharply in the past year.
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According to CMHC, 1,300 new units were added to the rental pool.
With so many units flooding the market, landlords are competing for tenants and constantly upping the incentives.
At 285 Dougall Rd., a new purpose-built rental building constructed by Troika was completed four months ago and is still half empty.
“We’re doing two months of free rent. We have some parking promotions,” said Jeff Kennedy, Troika’s CFO.
“For the month of January, we’re going to be offering some incentives on specific units, just to get a little bit more velocity going.”
But the usual economics of supply and demand aren’t playing out as expected. Rents have not fallen and instead have edged up.
According to CMHC, the average one bedroom rents for $1,596, up slightly from $1,509 in 2024.
Two-bedroom units are renting for $2,118, compared to $1,935 a year ago.
Moshtari Doust said the rising rents are being attributed largely to two factors, including what has typically been low renter turnover.
“If there has been a long, long-term tenant in that unit, now it becomes subject to the market rent,” Moshtari Doust said .
“So on that turnover, it means that the landlord can increase the rent for the prospective tenant.”
The newly-constructed rental buildings are also playing a factor, according to Moshtari Doust.
“The new buildings had their costs higher and now they have to charge a higher rent,” she said.
Whether rents will drop is uncertain.
New builds are expected to slow, but Kelowna remains one of the fastest-growing cities and that means demand could spike again.
“We need to continue to keep up and and not take our foot off the gas,” Kennedy said.
“This is a booming, growing city with, you know, certainly very dynamic tenant demand and that will continue to increase.”
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