Why Moncton and Saint John are two of the best long term investment cities in Canada

Posted on 23. Dec, 2010 by in News

With lower values, New Brunswick offers opportunity to those investors looking for good returns.  Kit Kadlec reports. Canadian Real Estate Magazine – December 2010

Two of the best long-term investment cities in Canada are located just a short drive away from each other in New Brunswick – Saint John and Moncton.

Both have average prices half of what you’d find in most other parts of the country, yet maintain vacancy rates around three per cent with some of the better yields available anywhere in Canada.

Not to mention it’s a very low risk area. While prices dropped throughout Canada last year, Moncton and Saint John gained value. Global economic downturns don’t apply here like they do in the major cities. During the national price gains this year, Moncton and Saint John have avoided any major spikes as well.

“An economist once described our market as boring, and it will probably stay that way,” says Paul Burns, president of the Greater Moncton Real Estate Board and an agent with Century 21.

The region is especially strong right now, says Pam DeCourcey, of Re/Max Professionals Saint John, as demand has fit well with the currently wide offering of supply.

“Inventory and interest rates are what is driving that balanced market,” she says. “We have market stability – slow and steady wins the race.”

Investors with low-risk appetites have recognized this, and the numbers back it up. An analysis by Plan B Economics in April showed Moncton had a price to gross rent ratio of 19 and Saint John was at 23. They ranked them second and eighth respectively, and both well below the national average of 35.

The April average MLS price in Moncton was $155,500, compared to $174,000 in Saint John. Two-bedroom house rents were higher in Moncton, however, at $695 compared to $665 in Saint John.

Averages can fluctuate greatly per property, however, and Saint John still offers some equally as good opportunities as in Moncton. DeCourcey says properties with six units and up can sell for $40,000 to $50,000 per unit, with rent averaging $750 per unit.

Thus an investment in a 10-unit building for $500,000, with eight of those units rented for the year and two vacant, could bring in $72,000 – a yield of 14.4 per cent.

The rental market is a little soft lately in Saint John due to some call centres closing, and Saint John’s energy projects starting to wind down. DeCourcey says a significant number of westerners are heading out too. But the rental vacancy rate has been below four per cent through 2009, and is not expected to rise too much higher this year.

Moncton’s market can carry some risks as well. The region’s economy is based in part on the trucking industry, and its shopping centres serving the local area also play a big part. A rise in fuel costs could hurt consumer confidence, says Burns.

Exchange rates could impact trade and tourism, as well. As of 2009, the vacancy rate was 3.8 per cent.

But for those who are employed, the cost of living is truly second to none, and the amenities offered make for a good quality of life. Near Saint John, retail big box store development continues, including the largest Costco in Atlantic Canada that just opened in May. New hotels have opened on the east side. These are just a few of the continued signs of a stable market.

Access to water a selling point in Saint John

“We have the benefit of always being just a short distance to the ocean and river systems,” says DeCourcey. “Accessibility to water, including majestic views, is a huge factor.”

She says Moncton is a similar market, although Saint John has a more historic side to it.

“Buyers with passion for history can find anything and everything in our area,” says DeCourcey.

“Our housing is very reasonable for this type of history. We are the oldest incorporated city in Canada – going back to loyalist times.”

The Saint John Great Fire of 1877 destroyed a lot of wooded buildings, but many brick structures remain. Most have been fully restored, although some haven’t.

Getting the most demand in Saint John are single-family homes under 10 years of age in Quispamsis, says DeCourcey.

Quispamsis, a suburb community, has a lot of new builds as well. The opening of the multimillion dollar community facility QPlex, used for recreation and conferences, was highly anticipated.

That has helped MLS sales in the Rothesay-Quispamsis area jump in the first quarter, and it is the priciest location for the area at $238,500.

Quality lifestyle and low crime in Moncton

In Moncton, crime rates are low, homes are affordable and of good quality, and there are plenty of outdoor activities at nearby national parks, beaches and golf courses.

Situated at the geographic centre of the Maritime Provinces, Moncton has been dubbed “Hub City.” Its CMA is the fastest growing urban region east of Toronto.

It was home both to a major shipping industry, then to the Intercolonial Railway of Canada, but after each closed, its central location still allowed for the economy to keep moving.

The trucking industry is now the latest reincarnation, and Fredericton and Charlottetown are within a two-hour drive. Moncton is made up of three municipalities: the city of Moncton, city of Dieppe and town of Riverview.

Lately, Dieppe has seen the most growth, says Burns, where development has been primarily single-family homes geared towards first homebuyers.

Condos can range greatly, from $100,000 to $300,000. Vacancy rates are generally below four per cent, and have recently fallen below three per cent, helping to push up rents of late. Burns says a two-bedroom unit with appliances will often go for $650 per month or less plus utilities.

“Rentals typically go to young people starting out, or more often now, to retirees,” says Burns. According to the CMHC, the lowest vacancies last year were in North Moncton, at 2.4 per cent – nearly half the four per cent vacancy in Central Moncton, with the highest number of properties.

Burns recommends investors avoid the difficult task of flipping here, and instead hold on for the long term.

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