An influx of Toronto buyers is pushing up prices in the real estate market of Prince Edward County and the latest numbers suggest local residents are struggling to find affordable properties.
Visitors from Toronto have long been attracted to the county’s vineyards, sand dunes and arts scene. Many have ended up buying property in the bucolic area, about a two-hour drive east of the city and surrounded by the waters of Lake Ontario.
But many county residents fear that the investment dollars streaming in have made it more difficult for local people earning local incomes to own a home.
The divergence comes at about the $400,000 mark, with sales of properties above that charging ahead and sales below falling fast – partly because people looking below that mark can find so little to buy. Some potential buyers are forced to look in nearby cities, such as Belleville and Trenton.
On the high side of the divide, July sales set a record in the county. “For homes over $400,000, it was a blockbuster month,” says Treat Hull of the brokerage Treat Hull & Associates Ltd.
Sales of houses above $400,000 surged 123 per cent last month from those in July, 2018, while sales below that level dropped 38 per cent.
Mr. Hull is quick to caution that the results for a single month do not provide an accurate picture of the county’s market, because visits to the area spike in the summer. “There’s a very, very pronounced seasonal pattern here,” he says.
Also, relatively few transactions take place in the county, which has a few sizable towns surrounded by farmland and vineyards. As prices rise, the affordable segment of the market shrinks. “In such a small market, there’s a risk that you’re just chasing noise,” he adds.
But looking at results for the year-to-date also shows the two segments moving in opposite directions: High-end sales have climbed, while sales of more affordable properties have tumbled.
For the year to July 31, Mr. Hull says, sales of homes over $400,000 jumped 23 per cent from the same period in 2018. Below the $400,000 mark, sales dropped 24 per cent in 2019 so far compared with the same period in 2018.
According to Mr. Hull, the median selling price in the county in July was $455,000 – a 32-per-cent rise from the median price of $345,000 recorded in July, 2018.
Mr. Hull says the sales numbers don’t reveal where buyers come from, but based on his conversations with clients, local real estate lawyers and fellow agents, he has learned the people spending more than $400,000 are from Toronto “almost invariably.”
Some of those buyers are purchasing a vacation home, others are buying an investment property to rent out on short-term rental platforms such as Airbnb and another cohort is fleeing the big city in retirement.
And while sales were robust in July, the summer sun may have encouraged some buyers after a particularly long, cold and wet spring in Ontario.
Earlier sales were dampened by financing costs and increasingly expensive list prices, which prompted some buyers to push the pause button, according to Richard Stewart, vice-president at Chestnut Park Real Estate Ltd.
“Sellers remain very tenacious with their list price and are unwilling to part with their property for much less than their expectations given the impressive sale prices they witnessed on neighbouring properties over the last year or two,” Mr. Stewart says in a note to clients in July. “With trends like these and stubborn sellers insisting on their price and buyers forced increasingly to crunch the numbers, deals are taking longer to occur.”
Another factor in the Prince Edward County market is the advent of short-term rental accommodation. Many of the investors who buy second homes in the county rent them out on Airbnb and other platforms, according to Mr. Hull.
As the PEC towns of Picton and Wellington have grappled with increased noise, garbage and traffic from temporary residents in the summer, they have also had to contend with empty properties and dark streets in the winter.
The popularity of short-term rentals has also siphoned some of the affordable housing from the county, as investors renovate century-old farmhouses and turn them into luxury accommodations.
Last year, the municipal council approved amendments to the official plan and zoning bylaws. The slate of regulations came after two years of study and public airings of the issue.
Under the planned regulations, operators will be required to obtain a licence and pay a licensing fee. The council will also set density targets for various neighbourhoods and issue licences only until that threshold is reached.
Davelle Morrison, a real estate agent with Bosley Real Estate Ltd., also owns investment properties in the county. Ms. Morrison says she is seeing a lot of properties that might have been great Airbnb locations sit on the market as a result of the new rules. “I do believe it has slowed down the real estate market there,” she says.
The forthcoming changes have also created a market for properties that will be “grandfathered” because they already operate as short-term accommodation, she says.
“I also think there are people who have gone rogue and opened new Airbnbs regardless of the impending rules,” she says.
In the latest twist, the municipal council recently voted at a planning meeting to ban all second suites from being used as short-term rentals. Second suites include such units as basement apartments and a loft space above a garage, for example.
The surprise move came without public consultation, and this week the council rescinded the ban.
The number of short-term rentals in the county has risen to 1,361 on a current website of inventory, compared with approximately 1,000 last year, Ms. Morrison says.
The local government had planned to have its slate of new regulations in place for this summer, but actually issuing the licences has been put off until the fall, Ms. Morrison says, adding that the delay has created a lot of uncertainty in the real estate market in PEC.
She points out that new buyers need to determine the density of existing short-term rentals to determine the likelihood of getting a licence to run their short-term rental from the county. Since owners haven’t been able to register for a licence yet, buyers are hesitant to make a home purchase, because it’s hard to suss out how close an area is to meeting or exceeding its density target, she explains.
Ms. Morrison has also noticed that many properties already set up as a bed-and-breakfast or multiunit rentals are overpriced, in her opinion. “Sellers think the vacation rental market and its potential are so strong, they build that high potential into their list price,” she says.
Ms. Morrison says most buyers are knowledgeable and they will sit on the sidelines until prices come down instead of making an offer to unrealistic sellers.
For her part, she disagrees with some of the planned changes, and thinks the lack of clarity is weighing on the market. “Real estate buyers do not like uncertainty,” Ms. Morrison says.
Your house is your most valuable asset. We have a weekly Real Estate newsletter to help you stay on top of news on the housing market, mortgages, the latest closings and more. Sign up today.