The PEI real estate market tends to be split into 2 categories. There is the local market, which consists of permanent residents looking for family homes and then there is the recreational market, consisting in large measure of summer visitors looking to combine vacation and real estate investment. There are however several other categories of PEI real estate purchaser. There is the retiree coming to PEI for the lower PEI real estate prices and the PEI real estate investor who purchases starter homes to rent to fellow islanders. There is also room to combine these ideas into one and move to Prince Edward Island when you retire using the equity in your current home to fund a PEI real estate purchase that is a mix of personal PEI home and investment rentals.

Should you decide to follow this route and you own a home in an area of higher real estate prices such as Toronto or Vancouver where the average prices can be around $500,000 - $700,000 and up, you would be looking for a primary PEI home in the $200,000 - $300,000 range plus the purchase of 2-3 rental homes which would account for the rest of your equity. In this way you have split up your PEI real estate investment into half for personal use and the other half to bring in an income which could be in the range of $2000+ per month. As you can see a PEI real estate investment such as this would provide a place to live and an additional income.

Real Estate TV is here! With it comes a plethora of shows designed to help the real estate buyer and especially the first time real estate buyer to navigate the obstacles of entering the world of home ownership.

The process of making the single biggest purchase of your life can be daunting one. Certainly even a PEI real estate purchase still requires that you go through the same steps as if you were buying a more expensive property in Toronto. The first step we recommend is securing a pre-approved mortgage. This means that your bank or financial institution has looked at your finances and determined just how much you can afford to spend. This will create a budget for your PEI real estate search and will ensure that you don't waste time or fall in love with a PEI home or property listing that you can not afford and it also gives weight to your offer when you find the PEI property that you want to offer on.

PEI real estate is amongst the lowest priced property in Canada. You can sell a home almost anywhere else in Canada and move to PEI, purchasing a PEI home and, depending on the equity you have built up in your current home, either live mortgage free or use the money to invest in conventional financial instruments or a second property here entering the PEI real estate rental market and become a landlord. Either way your retirement security is better guaranteed than staying in the area you are currently and have your money tied up in your family home which by now you will most likely have outgrown.

To give you an idea of the amount of re-investable equity you may have tied up, this is a table of home prices across the country. Compare the average with the cost of PEI real estate. PEI homes are very much less expensive than most parts of the country. As of 2018 these are average home prices by province as well as the percentage increase or decrease from the previous year as supplied by CREA.

As you can see PEI real estate is the bottom of the pack in terms of price, but not in terms of value. The difference in price between a home in Vancouver and a PEI home can be $500,000. Let’s just look at this in the most simplistic way. If you owned your Vancouver home you could buy a comparable PEI Home as well as 2 to 3 other pieces of PEI real estate, PEI homes that could generate rents of $1800 – $2400 per month which represents a good income based on being mortgage free. Obviously the advantage a PEI real estate investment can bring you depends on where you currently call home and the amount of equity you have built up over the years you have been purchasing your home.

HST(15% on PEI) is to be paid on new residential builds, and most all raw land. A lived in residential home is exempt from HST. When doing a real estate transaction, there is only HST on the commission amount only which is normally paid by the vendor (seller). Always talk to your lawyer to find out for sure what you qualify for.

The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time homebuyers who must pay these costs, as well as save money for a down payment. To assist first-time homebuyers with the costs associated with the purchase of a home, the Government of Canada introduced a FTHB Tax Credit - a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief.

In Prince Edward Island, the land transfer tax is calculated using the greater between a home's purchase price and its assessed property value. The PEI land transfer tax rates are as follows:

• less than $30,000 - no land transfer tax paid
• $30,000 - $200,000 - 1% land tax credit paid (Full refund for first-time home buyers)
• greater than $200,000 - 1% land tax credit paid (no rebate available)

PEI land transfer tax example calculation
If you are purchasing a home for $200,000, which is assessed to be $220,000, your land transfer tax will be:

$220,000 assessed value 1% tax rate = $2200 land transfer tax

First-time home buyers are exempt from the land transfer tax if the purchase price of their property is $200,000 or less and if the property is occupied as a primary residence if they meet the following criteria:

The purchaser must be a Canadian citizen or permanent resident who has:

• lived in PEI for six months before the purchase of a home, or
• has filed income tax at least two times in the past six years.

If there are more than one purchaser, both purchasers must be first-time home buyers.

This happens frequently with first time home buyers. Even if you think your credit history is less than perfect, talk to a mortgage specialist/lender. They are there to help you and to get you into your first home. In addition, know your credit rating. You can buy your credit score at equifax.ca or transunion.ca. Some banks have partnered with a credit bureau and you can access your credit score right from your online banking.

There are different options available depending on how much of a down payment you can afford. There is a conventional mortgage which is 20% down and low down payment mortgage(minimum 5% down). Low down payment mortgages require mortgage default insurance. The premium can either be paid up front or added to the amount you are borrowing. First time home buyers are eligible to use up to $25,000 in RRSP savings per person for a down payment on a home. The withdrawal is not taxable as long as you repay it within a 15 year period. To qualify, the RRSP funds you plan to use must have been in your RRSP for at least 90 days.

Customize your amortization period depending on how much you can afford. Paying off your mortgage sooner saves you interest costs, while a longer amortization period reduces your regular payment amount and gives you more room to manage your cash flow.

While rates are a valid consideration, the different types of mortgages, their payment structures, terms and flexibility will have a much greater impact on the overall cost of homeownership. Fixed rate mortgages, variable rate mortgages and combined fixed and variable mortgages are offered as choices. Many experts believe variable rate mortgages offer the greatest potential for long-term savings on interest costs.

You may be under or over-estimating how much you can afford to pay for your home. There are many online mortgage calculators that you can enter your income and expenses and they will calculate the maximum mortgage payment amount you can afford each month.

Knowing the amount you will be approved for gives you the confidence to begin looking at homes within your price range. We, real estate agents, find this to be so much more helpful when trying to help you find the home you can afford. It is very hard to have clients who were not pre-approved and find a house they think they can afford and they talk to their mortgage specialist and they find out they cannot afford that home. They are very disappointed. Get pre-approved and your pre-approved mortgage rate will be guaranteed for 120 days.

Use the Ratehub Payment and Affordability Calculators to help you budget for your home purchase.

After finding the home of your dreams, picked out your mortgage options and you are ready to make an offer, make sure that you don't forget your closing costs. It's fairly safe to assume you'll need an additional 1.5% of the purchase price to cover closing costs including: home inspection, lawyer fees, land transfer tax(if first time home buyer, you may be exempt from this tax), property insurance, moving costs and looking at ongoing costs including heating, electricity, repairs and taxes.

If you're renting, you may dream about owning a home of your own - a place to furnish and decorate as you like, to set down roots, to enjoy a great neighbourhood and to entertain friends and family.

But you may be uncertain whether you're ready to make your move from renting to buying, especially if you haven't started saving. Fortunately, with today's low mortgage rates and more flexible down payment requirements, your first home may already be within your reach.

You may have many reasons for wanting to own your own home. You may be getting married, leaving your parent's home, moving to a new job, and having children. You may want a secure, permanent place for you and your family. Whatever your reason, owning your own home can also be a good investment.

The long-term investment value of a home remains very good. Your home may be the single biggest investment you'll ever make, one that could pay off significantly in the long run.

The value of the average Canadian home has been steadily increasing. So the earlier you can redirect the money you currently pay in rent into paying down a mortgage, the faster you'll start building equity in your home. Low inflation and low interest rates, demographics and immigration are all factors supporting the belief that a home will continue to be a good long-term investment, at least in most parts of Canada.

Perhaps more than ever, location is the key factor driving price increases. In a strong housing market, homes in particularly desirable areas are more likely to see above-average price increases. In weak housing markets, these homes tend to retain their value better.

Although no one can predict where prices will be 25 years from now, the average price of a home in Canada has risen substantially in the past 25 years, making a home investment one of the best investments available today! At the end of the day, one of the biggest considerations isn't the market, mortgage rates or investment value, but rather your desire to enjoy the comfort and privacy of owning your own home. The best time to stop renting and start owning is when you are ready.

In order to ensure that you are only looking at properties that you are likely to receive mortagage approval for you can use the following payment and affordability calculators available from Ratehub.

Before any citizen of Prince Edward Island can get a building permit, there must be a successful Perk Test completed. This perk test is solely concerned with the type of soil a PEI property has in regards to a Septic System. The soil should be such that there is good drainage in the septic field that is behind the Septic Tank area, or, in other words, a good Perk Test measures the ability of the soil to absorb liquid.

Unfortunately, not all soils can absorb wastewater or purify it. Sewage disposal systems that are installed in unsuitable soils usually malfunction by leaking raw, untreated sewage to the soil surface or a roadside ditch, or by contaminating the groundwater. The sewage may contain deadly bacteria and viruses. It is expensive to remedy the odour problems and potential health hazards that result from the use of sewage disposal systems in unsuitable soils, so it pays to investigate.

To do a Perk Test, a hole of about 4 feet is dug by a backhoe in the area of the property where the septic tank and septic field will be located. Then a Prince Edward Island government official will get into the hole and analyse the profile of the soil at different depths in the profile. The PEI government official knows by training what a good soil profile should look like. He or she then will make a decision as to whether the Perk Test is Category 1 soil (The best soil test), or Category 2 soil, or Category 3 soil, etc. Most properties in Prince Edward Island will be either Category 1 or Category 2 soil.

In conclusion, it is mandatory that a Perk Test be done on Prince Edward Island before a Building Permit will be issued by the PEI government. When buying Raw Land on PEI, it is imperative that a Perk Test be done on it by the Vendor or Purchaser before the closing date of the offer agreement to protect the Purchaser.

Yes, any investor in the world can buy a PEI Real Estate property. In certain circumstances, when a non-resident of PEI is acquiring large acreage on PEI, the I.R.A.C. (Island Regulatory and Appeals Committee) may have to approve the purchase; however, in the vast majority of cases, approval is granted to the buyer. Every non-resident buying in PEI can purchase 5 acres and 165 feet on any waterfront property, and legally NOT have to go through the I.R.A.C. process. Two people can buy 10 acres and 330 feet water frontage, etc.

A non-resident person or corporation, or a resident corporation must make application if the person or corporation will have an aggregate land holding:

• in excess of 5 acres, or
• having a shore frontage in excess of 165 feet.

A non-resident person who acquires a land holding by gift, devise or inheritance from a spouse, sibling or direct descendent or ancestor is exempt from making application.

A person or corporation can hold an aggregate land holding of no more than:

• 1,000 acres for a person; and
• 3,000 acres for a corporation.

An application for a land purchase must include the following:

• a completed application form
• an orthophoto or GeoLinc map of the parcel(s) outlined in red;
• a legal description of the subject parcel;
• if the applicant is a non-resident person or corporation, details of recent advertising of the land on the local real estate market.
• a fee of $550 or 1% of the agreed purchase price, whichever is greater [for all applications by non-resident corporations or corporations where the majority of voting shares are owned by non-resident(s), and most non-residents].

Cheques should be made payable to the Island Regulatory and Appeals Commission and the completed application is submitted to the Island Regulatory and Appeals Commission.

Generally 3-4 weeks is required from the date an application is filed to the date a decision is rendered. However, depending on the complexity of the application, additional time may be required.

The Order confirming Government's decision is usually issued within one week to 10 days of the date of the decision and should be registered with the deed.

When an application is denied or is approved but no part of the purchase has been or will be completed, the Commission may refund up to 50% of the application fee upon application. An application must be made to the Commission within six months of the date of the decision and must include:

• a statutory declaration stating the grounds for the refund; and
• the original Order that granted or denied permission to acquire the land.

PEI charges 50% more in property taxes to owners who are not permanent residents. In order to get the lower tax rate, one must reside in PEI for 183 days consecutively.

The issues involving land ownership and land use in Prince Edward Island began in the early history of the province. The Island was initially divided into sixty-seven 20,000-acre lots or townships. These lots were allocated in advance of settlement to a relatively small elite group of absentee proprietors. Over time, the land was purchased from the absentee landlords and returned to local ownership.

Issues associated with absentee landlords resurfaced again in the 1960's, as non-residents began investing in local real estate throughout the province. As a result, substantial amounts of land in the coastal areas fell out of the control of local residents. In 1972, Government introduced amendments to the Real Property Act to restrict the purchase of land by non-residents.

In 1981, an application by a non-resident corporation to acquire 6,000 acres prompted public concern over the perceived impacts of land ownership distribution and its implications for the future. Some viewed this as giving pre-eminent control of the province's agricultural industry to one company. This led to the introduction of Bill 37 - the Land Protection Act in 1982.

If you would like more information you can visit www.irac.pe.ca

There is a strong rental market on PEI. Many islanders rent their homes and if well treated as tenants they tend to stay for long tenancies. When investing in PEI real estate for rental purposes you should keep in mind the budgets that most renters will be working within. Basically make sure you are buying PEI real estate property that will be priced to allow for less expensive rentals. It is not that the there are not people who will rent larger more expensive PEI homes but they are harder to find. You should purchase PEI real estate in the range of $75,000-150,000 when you are considering becoming a landlord. Additionally you might consider purchasing multi-unit rentals as they tend to be rentable at lower, more affordable rates as well as offering multiple income streams that aren't dependant on one rental. Generally multi-unit rentals are easier and more economically viable to rent.

If the average PEI home purchased for rental and as an investment in PEI real estate were to rent from $500 plus utilities to $800 including utilities then you would be at approx $300 to $400 per month added to your income. In addition you are building equity in the final sale of your PEI real estate holdings. You might consider it possible to add $5 per thousand dollars of investment equity to your retirement income by this means. Before embarking on such a program you should contact a licensed PEI real estate agent and Century21 for more information as this is just a basic outline of what the PEI real estate market and an investment in PEI real estate may be able to do for you.