“It’s definitely how things are trending,” said Denis Krasnogolov,, a leading Vancouver rental specialist, with Key Marketing Inc. “Essentially landlords are under more pressure to lower their rents in order to win good tenants because they are in a renter’s market, and the landlords in a new condo development are saying ‘how can we minimize this?’ They’re deciding not to compete with each other on rate, but to instead work together to maintain a standard rate for units in the development.”
That represents something of a sea-change for most condo-investors, who generally opt to use their own leasing agents or to vet and manage applicants themselves.
That independent approach is increasingly working to the benefit of renters, with landlords in the same condo complex forced to actively compete with each other as apartment-hunters look to negotiate rents.
A bidding war of sorts is usually the result, effectively driving down rental values for even new condo complexes.
Working with the developer-referred leasing agent has the potential to minimize that price competition, said Krasnogolov, suggesting it protects renal values by channelling all prospective tenants through the same application process -- offering the same rates sheet.
That strategy may grow in popularity as renters anticipate a glut of new condo units hitting both the Toronto and Vancouver markets over the next five years.
The effect will be to further swing the pendulum over in favour of tenants, increasingly spoiled for choice and increasingly willing to ask for reductions in order to sign leases.
That strategy is already working.
“Recently, clients – and I, as a property investor have also had to do it – are cutting rates as long as they can get a tenant to sign a three-year lease,” Steve Arruda, a Toronto real estate investment specialist with Century 21. “Those clients are worried about vacancies because of flood of properties, mostly condos, expected to come into the market. They’ve decided to take a bit of a rent drop in order to ensure occupancy and maintain cash flow.”
The analysis comes on the heels of a recent warning from the Central Bank, suggesting condo markets across the country are most vulnerable to a correction.
“Certain areas of the national housing market may be more vulnerable to price declines, particularly the multiple-unit segment of the market, which is showing signs of disequilibrium,” reads the Bank of Canada’s December economic review, issued Thursday. “The supply of completed but unoccupied condominiums is elevated, which suggests a heightened risk of a correction in this market.”
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