Here at Chestnut Park West, it’s no secret that we’re bullish
on prospects for Southwestern Ontario’s residential real estate
market, even amidst the challenges posed by an ongoing global
pandemic. Our market’s strength is based upon the incredible
economic diversity to be found in Kitchener-Waterloo, in
Guelph, and in communities throughout our region.

But in KW and Guelph specifically, higher education plays a key
role in bringing new talent into our communities and in fueling
our region’s economic engine. When news was received earlier
this spring that major universities and colleges would be shifting
courses out of the physical classroom and into the online space
for the fall term, local investors grew understandably nervous
about the potential impact of this decision upon vacancy rates
in the student rental housing market.

So, are we in for a collapse of the market and a subsequent
fire sale? Or should bargain-hunters save their time and focus
elsewhere? What follows is a quick summary of our thoughts on
where the student rental market stands as of mid-summer, 2020:

• Current pessimism is misplaced, in our opinion: vacancy rates
(for now) are sticking closely to their historic averages
• Thus far, only the Fall 2020 term has been announced as
being online – but student leases typically run for a minimum
of one year (turning over on either May 1 or September 1)
• Because prime student housing can be a very competitive
market, the vast majority of students looking to live off campus
aren’t ready to relinquish their hold on a rental
• We must also consider the fact that international students are
a major market in both Waterloo and Guelph – paying nearly
double the tuition of a domestic student
• Our universities and colleges rely on this income from foreign
sources, and you can be assured that they will leverage all of
their formidable lobbying strength to fight to have campuses
opened again ASAP
• In terms of available resale inventory, the current shortage
extends into student housing – there are no incredible deals
to be found simply because supply and demand continues to
dictate against it
• Residential intensification in Waterloo’s “Northdale”
neighbourhood has caused wide swaths of formerly student oriented
areas to revert to single family residential usage in
the last 4-6 years; this same dynamic is now beginning to
occur in parts of the Guelph market too
• One and two-bedroom student-oriented condominiums are
a growing market in both Waterloo and Guelph – they are
seen by some parent investors as a more straightforward and
stress-free investment to maintain over the course of their son
or daughter’s studies
• Much of the market in Waterloo and Guelph is driven by these
parent investors – who are not so much interested in earning
income as in finding a safe and reliable home for their children
(which will also hold its value over the term of their ownership
• The pool of “pure investors” for student housing is not as deep
as it used to be as costs have steadily increased over the years
• Mortgages for student dwellings are also becoming harder to
come by (at least via “A-Lenders”), as fewer large banks are
willing to operate in this market and qualifications for loans
are tightening up

While there are some hurdles in play for anyone who’s
looking to enter the student housing market right now,
it’s important to keep things in perspective. The lending
restrictions we’ve cited above are certain to loosen up
again once there’s some clarity from the universities on
when campuses will be reopening for normal classes. With
a lower number of total transactions occurring in the
meantime, existing owners can be reassured that values
should hold simply because of supply and demand.

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