the increase is representative of rental rates for comparable units in the areaThis presents an interesting quandary for the BC government's residential tenancy branch. Tsur Sommerville of UBC's Sauder School used a flawed (IMHO) Craigslist survey of market rents last year to conclude that Vancouver real estate was only 11% over-valued based on "market rents." Since that study was published, Vancouver prices have fallen 19% and show no signs of slowing down--and yet people aren't flocking to purchase rental units because they are suddenly cash-flow positive for the first time in half a decade.
Craigslist is not, and cannot ever be, a good source of statistical information. Institutional real estate investors are not, nor can they ever be, like individual condo owners who seek to cover their costs for their condo investment. Which is precisely why CMHC does not count individually owned rental units--the economy of scale is nowhere even remotely relative to what is actually happening in the rental market.
An apartment is not a condominium. Gordon Nelson Investments did not pay condo-equivalent market prices for their real estate investment purchases in the West End last summer. They bought apartment buildings, not condo developments. They knew the income the rents bring in and they knew the price they were paying for the building. If their numbers didn't add up to a good ROI, why did they buy? I'm guessing the numbers did add up to a healthy ROI. I'm also guessing this is part of a wider trend by investors and developers to argue that prices are indeed supported by rents and thus keep up the artificially inflated valuations of their properties; I am not suggesting this is a coordinated effort.
CMHC states that average rents for Vancouver two-bed apartments are $1124 per month. In the downtown region, they give numbers for condo rentals and apartment rentals at $1604 and $1075 per month respectively. They also indicate a year-over-year reduction in rental prices by 0.3%.
I'd like to say I'm confident that the BC residential tenancy branch will reject this Craigslist market-based claim for the nonsense that it is, but I'm not. It remains clear to me though, this is a case of someone trying to argue apples are oranges, and that "someone read somewhere" that oranges were selling for 50% more than they actually are, and the market for each should be the same despite the fact that it's not. I'm keeping my fingers crossed that wisdom and quality research prevails. The precedent setting nature of government decision making tribunals could be troubling for renters all over the province.