Rental signs are popping up everywhere. KovuliBC, where vacancy rate soared to the highest level of any Canadian metropolitan area.
“Supply has increased, demand has decreased, and as a result we are seeing a softer rental market,” said Shiva Moshtari Doust, lead British Columbia economist for the Canada Housing and Mortgage Corporation (CMHC).
Kelowna's vacancy rate is now 6.4 per cent, up significantly from 3.8 per cent last year, according to CMHC's annual rental market report.
Moshtari Doust said an outmigration of residents due to affordability and changes in Canadian immigration policy is contributing to this.
“The majority of non-permanent residents are renters, and that outflow has really dampened demand in the market,” she said.
“Non-permanent residents include international students, temporary foreign workers, and outflow of interprovincial migration primarily to neighboring Alberta, largely due to cost of living and affordability.”
Youth unemployment and rising supply are also major factors, and in Kelowna the impact may be even greater, according to CMHC.
Kelowna's unemployment rate rose to just over 11 per cent in November, according to Statistics Canada.
This is the highest unemployment rate in all of Canada.
The supply of rental apartments also increased sharply last year.
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According to CMHC, 1,300 new apartments have been added to the rental pool.
With so many apartments flooding the market, landlords are competing for tenants and continually increasing incentives.
Troika's new purpose-built rental building at 285 Dougall Road was completed four months ago and is still half empty.
“We provide two months of free rent. We have parking promotions,” said Jeff Kennedy, Troika's chief financial officer.
“We're going to be offering some unit-specific incentives in January just to get the momentum up a little bit.”
But the normal economics of supply and demand don't work as expected. Rents have not fallen; on the contrary, they have increased.
The average one-bedroom rent is $1,596, up slightly from $1,509 in 2024, according to CMHC.
Two-bedroom apartments rent for $2,118, up from $1,935 a year ago.
Moshtari Doust said rising rents are mainly due to two factors, including generally low tenant turnover.
“If there was a long-term tenant in that apartment, it is now charged market rent,” Moshtari Doust said.
“So this turnover means the landlord can increase the rent for a potential tenant.”
Newly constructed rental buildings also play an important role, according to Moshtari Doust.
“The cost of new buildings was higher and now they have to charge higher rents,” she said.
It is unknown whether rents will decrease.
Construction of new buildings is expected to slow, but Kelowna remains one of the fastest-growing cities, meaning demand could surge again.
“We need to continue to move with the times and keep our foot on the gas,” Kennedy said.
“This is a fast-paced, growing city that, as you know, certainly has very dynamic tenant demand and will continue to grow.”
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