House prices in Charlottetown rose 38.5 per cent over the last three years, one of the fastest rates in the country, according to the Canadian Real Estate Association.
That’s faster than Victoria (33.3 per cent), Vancouver (10.93 per cent), Toronto (25.3 per cent) and Montreal (17.7 per cent). In Calgary, Edmonton, Regina and Saskatoon, house prices fell.
The average house price in Charlottetown rose from $200,000 to $277,000. Of the areas commonly tracked by CREA, only the Niagara Region and Vancouver Island saw higher percentage price increases.
Greg Lipton, president of the P.E.I. Real Estate Association, said the seeds of the hot housing market were sown with the arrival of immigrants through the provincial nominee program.
“They came with a lot of money and they wanted something new, and we didn’t really have a lot of new stuff at that time,” said Lipton.
“New construction is very expensive. We’re up to close to $200 per square foot nowadays to get anything built.”
High immigration rates
P.E.I. has been one of the fastest-growing provinces population wise, and immigration has been a big part of that .
From 2010 to 2018 more than 12,000 immigrants came to the Island. But at the same time, P.E.I. has the worst five-year immigrant retention rate of any of the provinces.
When those immigrants leave, said Lipton, they are looking to get a return on their housing investment, so the price of that house goes up a little more.
“There’s not enough housing here right now, affordable or any other kind of housing, so once again people will pay the price.”
New uses for houses
But immigration is not the only driver of house prices.
Vacation rental services, such as Airbnb and VRBO, have also been a factor, as property owners have figured out they can get $200 a night for a unit instead of $1,000 a month on a one-year lease.
“Airbnb is something that we were very unprepared for,” said Lipton.
The possibility of higher return has led to an interest in purchasing more properties to convert to vacation rentals.
“The duplex all of a sudden turns into, well, it’s going to be a triplex. And the triplex is all single bedrooms with a shared kitchen and a shared bathroom,” said Lipton.
That activity is driving up demand and, consequently, prices.
And it has led to a shortage in the rental market.
In 2018, the apartment vacancy rate was 0.2 per cent. Under those circumstances, students are scrambling for a place to live. This is bumping up prices in the vicinity of UPEI.
“Anything that’s within walking distance of the university — a single family or duplex or triplex — the prices on those are getting to be astronomical now,” said Lipton.
“You can rent to a student and get four or five students in a place.”
At $400 each, that can bring in $2,000 a month.
This combination of new immigrants creating more valuable housing stock and new uses for housing driving demand has created some of the fastest growing home prices in the country.
It should be noted, however, that prices in Charlottetown are still some of the most affordable in the country.
The $277,000 average represents six years of the median household income in the city. That’s about the same as in Halifax, where it is 6.5 years, but well under the national average of 10 years.
In greater Vancouver, the average home takes 20 years of median household income to buy.
But while those prices may mean it is still possible for a household of median income to afford to buy a home, and recent trends have made it easier for tourists to book their stay and students to find a place to live, Ann Wheatley of the Cooper Institute said lower-income Islanders are being squeezed out.
Wheatley said at the core of the problem is less focus on houses as a place to live.
“It’s an investment, and it seems today in this market that it’s a relatively safe investment for people who have the money to invest.”
Recent market conditions bolster the argument for government-owned affordable housing, she said.
“A very effective way of dealing with the shortage of housing is to provide more publicly funded, publicly run housing,” said Wheatley.
Rather than funding private development of affordable units, Wheatley would like to see the government take direct charge of affordable housing, to ensure that it stays affordable.