Increasing Kingston’s Vacancy Rate: How does it affect you and your investment property?
With the start of 2020, many things are set to change in Kingston and the surrounding area. Promises and goals made, some accomplished and many broken. One goal that the City of Kingston is proud to boast is in relation to the recent increase to Kingston’s Vacancy Rate in the rental market. In 2018, Kingston’s vacancy rate was the lowest in Ontario for the second year in a row at .6%. The city made it their goal to increase the rate to above the provincial average of 2% and are hoping for a 3% vacancy rate by 2021. Recently it was announced that Kingston’s vacancy rate has gone up for the first time in five years, and now sits at 1.9%.
The CMHC (Canada Mortgage and Housing Corporation) report stated “This strong growth brought more balance to the market, alleviating some of the downward pressure on vacancy rates seen in the last few years. The number of vacant units more than tripled, generating the softest market conditions in the last three years.”
The city of Kingston states that there are more than 970 new residential units under construction, including almost 640 multi-unit buildings that will add to the rental supply this year and in 2021. With this statement, we can certainly expect the vacancy rate to increase yet again; but what does this mean for Landlords, Property Managers, and their investment properties?
Rental Market Stability for Tenants – with increasing supply of available units in Kingston, particularly downtown, the cost of rentals will stabilize and give tenants more options. This could certainly affect a Kingston landlord’s ability to be particularly picky about who they rent their property to.
Improved Quality of Housing for Tenants – tenants that are interested in renting a property in Kingston will have more options to choose from meaning that landlords may have to invest further into their property to make it more appealing to qualified tenants. Which property would a tenant choose given the opportunity of two properties? One with parking and laundry, the other with paid parking and coin operated laundry, for a similar cost.
Prepare for Your Unit to be Vacant – landlords will need to prepare themselves financially to have their unit potentially sit vacant, when otherwise they would never have to. Depending on the location and time of year a property comes available, a unit that has never sat vacant before very well could. This means that property owners will need to be able to cover the associated costs of their buildings or properties. In some of the slower seasons, such as January or February, a property may even sit vacant for multiple months.
The real estate market in Kingston is very intertwined with the rental market. For years, the affordability of Kingston homes has made it a great spot to purchase an investment property for locals and non-locals alike. With the recent and ongoing increase in the vacancy rate, and the potential stabilization of rent costs; the cost of houses in Kingston will need to stabilize as well. The real estate market in Kingston has been booming for the last several years, no doubt a ripple affect of Toronto’s booming market, as well as, the low vacancy rate in Kingston. If the real estate market continues to climb, and rent stabilizes, it will no longer be viable to own an investment property because rent will not cover the overall costs of owning the house.
All that said, rent costs in Kingston still increased in 2019 as Kingston has the fourth highest turn over rate in Ontario; allowing landlords to increase the rent more than the provincially mandated amount whenever their unit comes available. For the time being, Kingston is still a great market to invest in and may well continue to be for years to come.
It is important to stay informed with the city of Kingston’s plan for the vacancy rates, below you will find a link to a very useful document provided by the City of Kingston.
You can also find Kingston’s Strategic Plan 2019-2022 here: https://www.cityofkingston.ca/apps/councilpriorities/
City of Kingston’s information report to City Council – https://www.cityofkingston.ca/documents/10180/32824678/City-Council_Meeting-10-2019_Report-19-065_2018-Vacancy-Rate-Implications.pdf/49d393d4-99b3-416b-8580-526268028ad2
References used for this post:
The Whig Kingston
City of Kingston
Canada Mortgage and Housing Corporation
Photo Credit Steve Brule: https://www.flickr.com/photos/[email protected]/9100819613