P.E.I. house prices up double digits for 3rd year in a row

A rapid increase in P.E.I. house prices means renting is no longer a phase in life for many Islanders, says the P.E.I. Fight for Affordable Housing.

The benchmark price for houses, using an average of monthly prices as measured by the Canadian Real Estate Association, was up 16.8 per cent in 2022. That followed a 24.8 per cent increase in 2021, 10.0 per cent in 2020, and is part of a trend going back to 2015.

"A lot of people have been put in the situation where they have to rent because they're just completely priced out of the possibility of owning a home," said Cory Pater, a volunteer with the P.E.I. Fight for Affordable Housing.

In 2014, the benchmark house price on P.E.I. was the lowest among the provinces and had been increasing only modestly in the previous decade.

P.E.I. benchmark prices rose from $123,533 in 2005 to $154,367 in 2014. That 25 per cent increase was the lowest increase among the provinces. Over the same period national prices were up 73 per cent.

But prices on the Island started accelerating in 2015 and the story flipped. By 2022 the benchmark price was $353,308. That 129 per cent increase was the highest among the provinces. Nationally prices rose 97 per cent.

Over the course of those years, P.E.I. house prices rose above the benchmark in Newfoundland and Labrador, New Brunswick, Winnipeg and Saskatchewan.

7 ½ years' wages to buy a home

In the meantime, wages on P.E.I. remained Canada's lowest.

In order to put this in perspective, CBC P.E.I. has created a home ownership affordability index, which is equal to the benchmark price for houses divided by average annual earnings. Put another way, it is a measure of the number of years it would take the average earner to make the money equal to the cost of a house at the benchmark price.

From 2014 to 2022, P.E.I.'s affordability index rose from 5.02 to 7.65. That 52 per cent increase is slightly under the national average of 58 per cent, but that number is brought up by a very large increase in Ontario, where the index rose 77 per cent.

National affordability numbers are skewed by Ontario and B.C., where the indexes are 15.51 and 16.72 respectively. Looking at how the provinces rank puts P.E.I. in a much worse position.

In 2014 only Nova Scotia and New Brunswick had lower indexes than P.E.I. In 2022, only B.C., Ontario and Quebec were higher.

It also worth noting how quickly that change has happened. Virtually all of the change in the P.E.I. index has come since 2020. Until that point, wages were largely keeping up with increased house prices. But from 2020 to 2022, the index rose 50 per cent, the biggest increase in the country for those two years.

Saving for that down payment

Increases in rents on P.E.I. go back further than the increases in house prices.

Rent increases can vary a lot from year to year. Looking at five-year averages to smooth out those changes, we can see from 1995 to 2002 the average for the previous five years was between one and two per cent. Since then, it has never been below two per cent, and in the last three years it has been over 3.5 per cent.

The net result is, since 2005 when house prices started going up, the average rent on the Island is up 73 per cent.

And that, said Pater, is having a big impact on Islanders trying to buy their first home.

"It's harder to save, to get to the point where you can own your own home, if 30, 40 per cent of your income is going towards renting an apartment," he said.

"We have this sort of view of the rental market as a phase in between when you get out of college and when you own your own home. For more and more people it's looking like it's not going to be a phase. That's just how their housing outlook is going to be forever."

This new reality should add to the importance of the province putting in place more protections for renters, said Pater.

Finding a way

Despite the price increases, the P.E.I. Real Estate Association says it is not seeing a decrease in first-time home buyers.

That first-time home buyers are still in the market is a testament to their determination, said association president James Marjerrison.

"It's always a challenge for first-time buyers to get into something. Certainly, when prices increase as rapidly as they have the last few years that puts added stress on the situation of trying to get your first home," said Marjerrison.

"If somebody is determined to get their first home they usually find a way to make it happen."

Prices have been falling in recent months, as the Bank of Canada raises interest rates in an effort to tame inflation. Unfortunately, because mortgage rates are up, the lower house prices make little difference in what home buyers actually have to pay. Payments on principal are simply being traded for interest payments.