Vancouver residential rental investors are eying a small town in Saskatchewan where potential rents are higher and housing prices are a fraction of that in Metro Vancouver.
Estevan, population 11,000, is a southwest Saskatchewan boomtown, a key service centre for the giant Bakken oil play that is estimated to have the second largest oil deposits in North America.
“Estevan represents a powerful opportunity because of the Bakken oil fields, “ said Vancouver-based Andrew Schulhof of Strategic Investment Realty. At the recent Jurock Land Rush conference in Vancouver, Schulhof picked Estevan the hottest landlord market in Western Canada.
Schulhof is working with an Estevan developer on a modular housing subdivision that is offering three-bedroom detached houses, with land, from $265,000. “We believe these will rent for around $2,700 per month,” he said.
This translates into positive cash flow for investors putting down a minimum of 20% towards the purchase, based on current 25-year amortization and today’s mortgage rates, Schulhof noted.
Estevan Mayor Roy Ludwig welcomed the new residential development, but warned that rents remain high.
“I would say affordable [rent] in Estevan is $1,400 to $1,500 for a two-bedroom apartment,” Ludwig said, “People are paying $1,100 to $1,200 for a room in a basement.”
This makes Estevan the most expensive rental market in Canada according to Canada Mortgage and Housing Corp., which estimates the average two-bedroom apartment in Metro Vancouver rents for $1,100 per month.
Estevan has a near zero rental vacancy rate, the agency reports.
Despite the new rental construction– which includes three new hotels – it is likely Estevan will remain a tough market for tenants.
Many oil workers are now living in giant camps close to Estevan because of the housing shortage, the mayor noted.
However, as work on the Bakken fields enters its second decade, many work camp residents are looking for more permanent accommodation.
The three new hotels planned for Estevan may be able to accommodate some of the work camp overflow. Two are Holiday Inns and the third has not yet been named. All have been approved but none are yet built.
The city is also working with the Saskatchewan Energy Training Institute on a student housing project.
Yet prospects remain grim for those who can’t afford Estevan’s average rents. “It’s unfortunate, but we have these people who are sleeping in ATMs [kiosks] or vehicles. It’s there and we have to be upfront about it,” the mayor said.
