Could Kelowna’s rental market finally be cooling off?

In a city renowned for its beaches, the summer heat still pales in comparison to Kelowna’s red-hot rental market.

A dismal vacancy rate combined with an upstart economy has led to years of increasing rent prices for the largest city in B.C.’s Interior.

However, a Canadian monthly rent report has shown that rent prices have recently hit a plateau after reaching their peak in February.

Could the price of rent actually be falling in Kelowna? For anyone looking for a room, the concept is hard to believe.

While month to month rent prices have dipped in 2018, examining the data year over year shows a drastic increase for both one and two bedroom units.

"Though Kelowna rent has been fairly flat for the past few months, it still has large year over year growth rates, one bedrooms are up 10.7% since this time last year in our most recent rent report, which shows that demand is still very prevalent there," said Crystal Chen of PadMapper.

"New stock will help in the future but until it is built and move-in ready I don't see the prices coming down any time soon."

Last year was a banner year for developers, construction started on a record 3,577 homes of all kinds, with 56% of those new construction starts being rent specific apartments.

“The spike in rental construction is now starting to make it’s way into the market, as completions of rental units in Kelowna are now at an all-time high. The completions to date in 2018 represent a 6% increase to the total count of purpose built rental apartments, following a similar increase in 2017," said Braden Batch, Senior Market Analyst Canada Mortgage and Housing Corporation.

"The new supply will typically bias average rents upward in the immediate term, since new units tend to rent at a premium, but over time the additional supply will make the rental market more competitive, placing downward pressure on market-wide rents.”

Not all Kelowna residents looking to rent will end up in a new unit, however, the residual downward pressure on the surrounding rental market will have a strong influence on prices over the next few years.

"The average I see right now for a two bedroom unit in a 15-year old complex is about $1600 and if these new units come on the market for a similar price it will definitely have a domino effect," said Remax Property Manager, Darryl Anderson.

"If people start jumping at the opportunity for a newer place at a similar cost, and they will, it will force property owners of older units to make changes to their rent."

According to Anderson, some relief to Kelowna's rental market can't come soon enough.

"What we are finding is that any product on the market at a reasonable price will immediately receive 20 to 30 calls," said Anderson.

"One and two bedrooms between $800 - $1400 a month, that's what people are looking for."

The new Mission Flats apartment complex on KLO Road has added a significant 288 rental suites to Kelowna's rental pool and while the complex is already backed up with a waitlist its price point will likely have that residual effect on older rental properties.

A two bedroom, one bathroom unit in Mission Flats rents for $1439-1529, while the new Carrington Ridge complex in West Kelowna rents a two bedroom, two bath 913 sq.ft. unit for $1,595.

Real estate professionals have suggested providing rebates, tax incentives or reduced down payments to homeowners willing to commit their properties to being affordable rentals.