There are a great many dynamic forces at work on the local housing economy and a striking contrast between the two cities straddling the Columbia River. Vancouver currently has a significantly higher median rent than neighboring Portland, OR. According to a recent article in The Columbian, median rent in Vancouver for a two bedroom unit is $1678 compared to Portland at $1320. Vancouver is nearly on par with Seattle in fact which has a median two bedroom rent of $1690! This flies in the face of reason since Portland’s median home price is quite a bit higher than Vancouver. Seattle’s median home price is more than DOUBLE Vancouver’s.
Portland had skyrocketing rents a few years ago and the city decided to do something about it. Rip City added some 15000 new rental units over a period of a couple of years. Many people protested the high cost of the new units as being ineffective at lowering local rents, but they were unaware of market dynamics. The new fancy units stole renters from overpriced lesser units which forced those landlords to lower rents and thus down the line. The results are irrefutable as Portland now is a bargain for rent versus much more expensive Vancouver.
Vancouver is on a similar track building quite literally thousands of new apartment units every year. There is no reason the same result experienced in Portland will not happen here as well. Many people show up at city council meetings bemoaning the fact the new apartments are so expensive. New stuff is always more expensive and will almost always fetch higher rents. But that will put downward pressure on older, less modern, overpriced existing units in the local area. It just happened in Portland for heaven’s sake it will happen here.
But what of the local condo market? Will all these expensive apartments act as a drag on local condo sales? Not likely; I believe that all these mid level to high end apartments are bringing new residents to Vancouver that will see the relative value in local condos. This is particularly likely to be the case downtown and on the waterfront where rental units outnumber condominium units by at least 10 to 1.
The median rent in Vancouver is $1678 city wide, but on the waterfront and downtown that figure is much closer to $2500-$3000. People that qualify for rents in that bracket qualify to buy condos priced in the $500k-$600k range. Those that decide they want to stay downtown, become qualified buyers for our rather limited inventory of condominium units Downtown.
Right now on the fantastic new waterfront there is already 275 apartment units built and ZERO condo units built. There are another 248 units under construction on the waterfront against just 40 condo units underway. That will leave a 13:1 ratio of rental units versus condo units on the waterfront. Additionally there is at least another 500 rental units on the waterfront working their way through the permitting process and only another 80-100 condos doing the same. Downtown has no new condos proposed but more than a 1000 new apartments units under construction or working through the permitting process, in addition to the aforementioned 500 on the waterfront.
In this truncated market with the Corona Virus, Vancouver’s higher rents will attract money away from Portland as our units can yield a higher income to build cost. Translation: higher profits for investors. This will take the squeezed investment money pool and pour more into our local economy quite possibly at the expense of Portland.
I think the local urban condo market should be a great shape so long as we can keep the COVID-19 from train wrecking the greater economy.