If you’ve paid attention to trends in Canadian real estate in the last decade, you’ve probably heard about Canada’s vacancy problem. Many cities across the country have struggled with high housing vacancy rates despite a need for affordable housing.
The government has taken many actions, such as changing the rules on using hosting sites like Airbnb and buying property as a non-Canadian, but nothing truly curbed the crisis. Until now.
What exactly is happening with vacancy rates in Canada as they decline for the first time in more than a decade?
Photo by sebastiaan stam on Unsplash
The Overall Picture
After reaching an all-time high of 8.7% during the 2016 census, the 2021 census has shown the national rate to be at its lowest point in nearly 20 years: 8%.
What else can the census tell us about the changes happening? Point2’s research on vacancy rates reveals these key points:
- There are still around 1.3 million homes vacant in Canada, but the national vacancy rate is at a low point of 8%.
- Vacancy rates fell in 87 of 150 large Canadian cities.
- Cities in Quebec and Ontario show the lowest vacancy rates of less than 2%.
Buying a house remains a difficult, trying process according to a homebuyer survey by Point2 targeting the many Canadians recovering from the effects 2020 had on the housing market. Still, lower vacancy rates are a good sign for the overall market.
What’s Helping Rates Decline?
Looking closer at the details of declining vacancy rates has many people asking: what is causing this change? It’s too soon to know for sure, but experts suggest that several different factors affect rates, and the reasoning behind rate changes probably varies from place to place.
Taxes and Regulations
For years, many cities have been implementing taxes and regulations to curb high vacancy rates. There is a high demand for housing by usual residents, and a lot of properties were not being used as primary residences.
By setting taxes and provisions that make it less appealing to leave the property vacant, some cities like Vancouver may have been able to lower their vacancy rates. The total number of properties used for “not usual” residencies has decreased by nearly 2,000 properties. Vacancy rates have fallen by almost 15% in the last five years.
Additionally, many of these taxes are “empty house” taxes, and advocates hope that these taxes will discourage investors from sitting on empty properties and help to cool the housing market. Ultimately, it’s a mixed bag. These taxes seem adequate in some areas, but others have seen markets continue to rise.
Market Highs
Some experts are also speculating that hot markets encourage some people to sell rather than hold onto properties as investment properties or for third-party hosting markets. Properties are selling at high prices, and bidding wars are competitive. This encouragement may have led to properties being sold and moved into as a primary residence.
Still, some know they can get the best real estate in Canada without paying inflated prices and are hopeful that the market will cool down. So, it is hard to know if this is a real contributing factor to decreasing vacancy rates. Rising housing costs can convince some investors to sell, but it isn’t always possible for usual residents to buy at these sky-high prices.
Moving out of Town
Another theory is that the high number of buyers who decided to move into smaller towns across the country during the height of the COVID-19 pandemic ultimately changed the market. Vacancy rates in more than 80 cities decreased, but not all of these cities were huge cities. Huge towns like Montreal still see high vacancy rates, which didn’t fall nearly as rapidly in these areas as in some attractive small towns.
It’s possible that the movement of people caused by a change in lifestyle and the workforce may have ultimately changed vacancy rates for the better.
Photo by Mike Cheshire on Unsplash
Reduced Tourism Demand
It has long been believed that high vacancy rates in many parts of Canada were caused by the demand for short-term rentals for tourism. As COVID-19 incredibly stinted tourism, the need for these rentals also sharply decreased. Ultimately, this may have led many property owners to decide to end their involvement in the short-term rental market and sell or convert their property.
Experts believe this may have been a contributing factor to the decreasing vacancy rates in some areas, but more studies need to be done to verify this theory. However, it is clear that the tourism industry has changed in the last two years, which is sure to affect the vacancy rates as well.
