Real Estate Investing in Prince Edward Island - P.E.I.

Real Estate Investing in Prince Edward Island - P.E.I.

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Just off the coast of Nova Scotia and New Brunswick lies gorgeous Prince Edward Island, a slim jewel in the Gulf of St. Lawrence. While most foreigners may even forget that Canada has its island off the eastern coast, this picturesque stretch of land was the birthplace of Canada.

Table of Contents -Real Estate Investing in Prince Edward Island - P.E.I.

The original Mi’kmaqs settlers marvelled at the beauty of Prince Edward Island. They named it Epekwik, which means “resting on the waves.” That name could not have been more apt for this idyllic piece of Canada that is growing in popularity by leaps and bounds.

Though Prince Edward Island runs just 140 miles from tip to tip, there is more than enough charm to compete with any other province in Canada. Just consider this, regardless of where you’re at on Prince Edward Island, you are no farther than 16 kilometres from a body of water. Thanks to the province’s small size and overwhelming beauty, it’s no wonder that less than half the population lives in urban areas.

Despite the even population spread across PEI, there are still ample opportunities for real estate investment if you know how to invest and where to look.

An exploding population

At first glance, the population of Prince Edward Island may not seem overwhelming. At 153,000 residents and counting, PEI rates as Canada’s tenth most populated province. A lot of real estate investors may take a glance at that number and immediately assume that their time would be better spent elsewhere. That would be a mistake. If the Island’s immigration rates continue as they have, a savvy real estate investor could be getting in on the ground floor of something big.

Over the last two years, the province of Prince Edward Island has grown faster than any other in Canada, by a large margin. That higher population has nothing to do with a growing number of births. It’s not a fluke, either. Year after year, more people are moving to Prince Edward Island than any other place in the nation. It’s not just Canadians, either. Since 2010, the number of international immigrants to Canada has hit record highs. As the number of immigrants to Canada spikes, several of those people are choosing to set down their stakes on Prince Edward Island.

Skyrocketing home costs

All that new traffic to Prince Edward Island has had a dramatic impact on the real estate market. In the last five years, the market in PEI has come to rival the nation’s biggest cities in terms of its difficulty and potential payoff.

Toronto is a Canadian city that seems to get most of the attention when it comes to investment news. Rents and home prices are high and getting higher, and investors with the capital could stand to make a lot of money. In recent memory, investing in Prince Edward Island real estate has come to look increasingly similar to those larger markets.

Indeed, the increasing demand for homes on Prince Edward Island has seen home values jump more than 38 percent in the last three years. That’s more than a ten percent increase compared to Toronto, which saw a 25 percent increase in home value, or Ottawa, which saw a 21 percent increase in home value over the same period.

People shopping for a home in the provincial capital of Charlottetown are running into a real estate market so stuffed with prospective buyers that they’re pulling out all the stops just to get noticed. They need to give sellers a reason to choose them over the competition. Some families, for example, are including portraits as well as letters meant to strum on a seller’s heartstrings. 

One real estate broker said the market on Prince Edward Island was so hot, “People are banging on doors, saying ‘I like your house, are you interested in selling?’ And some people say ‘yes, maybe we are if the price is right.’” In short, if you’re an investor with the capital, PEI somewhat resembles the Wild West right now.

Construction can’t keep up

Before the outbreak of the novel coronavirus, COVID-19, Prince Edward Island was on track for record home construction for the third year in a row. That increase is nothing to sneeze at, either. Prince Edward Island Construction Association general manager Sam Sanderson estimates that the total value of construction went from $350 million in 2018 to more than half a billion dollars at the end of 2019. And that number was set to go up once more in 2020.

Demand for housing is so high in Prince Edward Island that most new multi-unit buildings are often filled by the time construction is completed.

Even working at a feverish, record-breaking pace, one factor keeps new construction on PEI moving slowly. That’s a lack of skilled labour. For some reason, the province is having issues drawing in new tradespeople. Even with the surge of new construction projects, there remain about 500 open slots for skilled tradespeople throughout Prince Edward Island. The skilled labour shortage means that construction simply can’t keep up with the demand for new homes, no matter how much money builders throw at the problem.

Even if Canada were to be able to safely reopen tomorrow, and even if the exact number of skilled workers were to show up ready to work the next day, long-term bets indicate that it might still be several years before the supply of available housing rises to meet the level of demand.

In short, that one factor means that Prince Edward Island is very much a seller’s market, and it’s likely to remain so through 2025. Those people with a finger in PEI real estate investment may be able to ride a significant price advantage for quite some time.

The great escape

As construction struggles to compensate for the influx of people to Prince Edward Island, the price of homes in the city’s urban areas is steadily rising. In 2017, the average cost of a home in the capital city of Charlottetown was $200,000. Today, the average price of a home in the same city on the same spot in the same condition is roughly $277,000. What’s more, a lot of new construction — even multi-unit buildings — cater to those with a higher budget.

As a result, the availability of starter homes for young families has become scarce. Those in search of private homes in the $200,000 range are now slowly moving to the outlying areas of larger municipalities. As a result, real estate investors operating on a modest budget should consider probing the communities surrounding larger towns like Charlottetown in search of good deals. Fortunately, Prince Edward Island’s limited square mileage opens up a lot of possibilities for those willing to do the legwork.

Visitors in droves

As you might expect with any stunning, oceanfront island-like PEI, people want to visit. Given the Island’s inviting atmosphere and temperate climate, it’s no wonder that Prince Edward Island is one of the most popular destinations in Canada.

The number of people who visit Prince Edward Island has always been high, but things have gotten serious in the last decade. Between 2013 and 2017, the number of visitors to Prince Edward Island began to swell dramatically. By the end of 2017, the number of visitors to Prince Edward Island had eclipsed a million annual tourists. Quick reminder: that’s about seven times the local population.

Of course, all things must come to an end, and in 2018, Prince Edward Island announced that it had received fewer visitors in 2018 than in the year prior. Yep. PEI received precisely 1.3 percent fewer tourists. The island still easily hit the million-visitor mark in both 2018 and 2019. On average, the visitor vacancy rate is somewhere around .2 percent.

For real estate investors, that means that the PEI short-term rental market is extremely lucrative. Coupled with the Island’s difficulties in kick-starting new construction projects, those investors able to take control of a short-term rental unit (or two), could see continued returns for years to come. It’s also possible, once again, to use the relatively small size of Prince Edward Island to your advantage. That is, scouring the outlying municipalities could turn up excellent investment opportunities for short-term rental properties that — while not located in an urban area — still provide rest and relaxation in picturesque spots.

Charlottetown

 The capital of Prince Edward Island and its largest city (by a significant margin) in Charlottetown. In 1864, the city etched its name in Canadian history when it hosted the Charlottetown Conference. This historical moment was the first meeting of the officials who would eventually create the Canadian Confederation. Hence the city’s nickname, the Birthplace of Confederation. That long history is evident on every corner of Charlottetown, a city that is a world apart from any other in North America.

Walking through the streets of Charlottetown, you might forget you’re in Canada. The city is composed of several distinct communities, each with its proud history and heritage. It’s reminiscent of a European getaway. The vibrant colours and unique architecture may recall a charming Scandinavian fishing village in one community, while mansion-style homes on palatial estates may evoke the Old South on another.

With its burgeoning reputation for tasty cuisine, gorgeous scenery and an all-around welcoming attitude, it’s a small wonder that only 36,000 people call Charlottetown home. As competitive as the house-buying market can be, renting in Charlottetown is agreeable. A one-bedroom apartment in the city center will run about $981 a month, plus about $200 in utilities. Those people looking for more room, however, will see the average rent of apartments increase quickly. The monthly rent for a three-bedroom apartment in the city center will run between $1,500 and $1,800 a month. With utilities added, the average monthly rates could rise by more than $450. When one considers that the average annual income in Charlottetown is just a hair over $30,000, the staggering height of those rents comes into clear focus.

Though it may not be ideal for the residents of beautiful Prince Edward Island, the atmosphere is ripe for real estate investors with the capital to buy into the market.

High-end opportunities

For those people who want to see their real estate portfolio skew toward high-end purchases, the upper-echelon communities of Charlottetown provide plenty of opportunities. There are several neighbourhoods throughout the city in which the average home prices start at half a million dollars.

You can opt for the cozy boathouses of Paynter’s Creek and French River. Shop the Old-style English manors that dot Brighton. Hob knob with the elite who make up the peninsula of Lewis Point. Regardless of your tastes, there is likely to be a neighbourhood in Charlottetown with the right upscale dwelling for your investment dollars.

The perfect opportunity for joint investment

It’s probably no surprise that you won’t have much luck trying to dive into investment in Prince Edward Island by yourself. Sure, you likely understand that you’ll need to be on good terms with a knowledgeable real estate agent and a bevy of financial experts. More than that, however, successful investors seek out the company and insight of entrepreneurs young and old.

Unfortunately, on PEI, you’ll have to look long and hard for one of the real estate investment groups that seem ubiquitous in other provinces. That doesn’t mean that investing in PEI real estate needs to be a solo game. Working with a partner (or two, or three or four partners) in the province not only increase the breadth of your investing knowledge, but it also reduces the financial stress of buying into a market that is as competitive as Prince Edward Island.

Prince Edward Island Real Estate: Rental Properties in PEI


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Scott Dillingham

Scott Dillingham

I have been investing and lending to real estate investors for nearly 10 years now. After thousands of successful deals between flips, rent to owns, student properties and commercial assets I have developed a deep knowledge of real estate investments and have a passion of sharing this information with the world! If your looking for a lender who specializes in rental property financing you're going to want to connect with me at team@lendcity.ca.