Tenants burned by hot Saskatoon real estate market
The front page of today’s Star Phoenix says, “Tenants feel pinch: Heated market driving increases in rental charges.”
The story references the predicament of a Saskatoon woman, Marilyn LePage who faces her third rent increase in the last twelve months. She has written a letter to city council asking, “What can be done to keep rent increases and frequencies under control for myself and other Saskatoon citizens?”
The answer she received was sure to disappoint as council made it clear that “rent controls” fall outside of the local jurisdiction. City solicitor Theresa Dust reminded those present of past attempts by the province to place controls on rents and noted that it produced “poor results.”
This is one of the sad realities of a real estate market which is experiencing a growth spurt. It affects almost everyone, and those who don’t own their own home can be affected the most. They not only move further away from owning a home due to increased cost of housing, but they inevitably pay the price in higher rental costs as market values increase.
I expect that we’ll hear many more stories like Ms. LePage’s over the coming year. East-side apartment style condos are now selling in excess of $130,000. An investor who purchases such a unit with 25% down will face carrying costs of over $850 per month not including maintenance or insurance. At present, that same unit has a market rent of about $700. Assuming the unit is occupied every month of the year, the landlord is a couple of thousand dollars shy of covering expenses. They won’t be excited about that for very long.
At the same time, vacancy rates are falling across the city and that trend is expected to continue as more people move back to Saskatoon. Condo conversions will likely remove a number of units from the rental market over the next two years.
Ultimately, rents are subject to the principle of supply and demand just like resale real estate is. More renters and fewer rental units equal higher rent payments. It’s pretty much unavoidable.
Read the Star Phoenix story here
I’m always happy to answer your Saskatoon real estate questions. All of my contact info is here. Please feel free to call or email.
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Norm Fisher
Royal LePage Saskatoon Real Estate
6 comments so far. We'd love to hear your thoughts.
April 3rd, 2009 at 3:44 PM
I agree that someone buying a revenue property in todays market would have to charge more, but in many cases, the landlords have owned these properties for years and purchased them at much lower prices.
It seems to me that carrying costs would not have increased at all. Landlords have a choice to make: Sell and profit, or keep rent affordable while someone else pays off their comparatively tiny mortgage in exchange for a place to live.
April 3rd, 2009 at 3:44 PM
Good points Jeff but I think that the “supply and demand” part of the equation will not be ignored regardless of the landlords equity position or the amount of the initial investment. We could say that people don’t need to be selling their homes as high as they’re currently selling, but of course in most cases, they’ll take it if they can get it. Landlords will be no different and I’m concerned that the supply of good rental properties has taken a hit that will take a while to recover from.
April 3rd, 2009 at 3:44 PM
I’m one of the big, bad BC investors mentioned in the article. I bought a Lakeview condo for $78k in 2005 and saw one listed this week in the same building for $130k! You could knock me over with a feather… never expected such appreciation. Anyway, I bought it for the long-term, you know have the tenant pay off the mortgage, etc. I’m in a rental pool so I can’t just willy-nilly raise the rent. The property manager did however, raise the rent 5% this Jan. which was nice, but I’m not out to gouge anyone. Right now it’s breaking even and is projected to make a profit next year. I think it’s the larger landlords who bought poorly managed buildings where rent wasn’t kept at market values who are doing these steep increases now. Just goes to show you – landlords should keep the rent at market levels. Being “nice” to your tenant by not increasing the rent for years only puts them in the situation such as Marilyn Lepage is in now.
April 3rd, 2009 at 3:45 PM
sdude, you raise some good points. I think if you review my article you’ll be hardpressed to find any implication about “big bad landlords.” I believe every investor deserves a fair return and they are valuable contributors to housing.
My family is also involved with residential rental property and you’re right, it is important that market rents are maintained. Those who don’t have such policies often let their properties fall apart and that’s not good for anyone either.
Congratulations on your great return. I couldn’t interest you in selling it could I?
April 3rd, 2009 at 3:45 PM
Well, the SP article says:
“New investors from outside the province are another reason for soaring rents. According to the CMHC report, “the market for the buying and selling of existing apartments has been vigorous in Saskatoon with investment capital flowing from Alberta and B.C. where prices have soared.”
Makes it sound like we are a bad influence… I would like to point out that I sunk $6,000 in repairs into my condo, hired 2 local contractors and rang up a nice bill at the local Home Depot. For which I get practically no tax break but my tenants do get a nice place to live for only $690/mth (rents which would cause a stampede for a 2 bdrm here in Vancouver).
Haha, no I won’t be selling, but I will be buying sometime this year, but I see you no longer work with investors…
April 3rd, 2009 at 3:45 PM
You sound like an excellent landlord, and again, your investment in the Saskatoon area is appreciated by most, including myself.
Vancouver hey? I’ll bet a renter would be looking at twice that price for rent there, maybe more?
I just sold a condo for a guy that got trasferred to Vancouver. I think he’s in Langley. His little Saskatoon condo went for $113,000 back in early January. When I told him what it was worth I could tell he thought I was full of it. He said he was sure it wouldn’t sell for more than $90,000 as he had just purchased it 18 months earlier for $73,000. 23 people looked at it the first day it was listed and I received about a dozen offers. He was so excited he almost wet his pants.
He picked up a condo there which is just over 600 square feet for $285,000. I think it kind of dulled the excitement a bit.