Prince Edward County investors who want to get an idea where investment returns on income properties are headed here would do well to follow what’s happening with similar investment properties in Toronto.
Cap rates measure the rate of return on real estate investments. Over the last five years, Toronto cap rates on multi-residential, low-rise residential properties have declined from the 6% level in 2011 to around 4% this year.
While rental properties in the Quinte area typically offer a rate of return that is significantly higher than in Toronto, reflecting the fact that there is greater risk and less capital available in smaller markets like Quinte.
On the other hand, the trends between Toronto and Quinte track closely, as excess capital enters the Toronto market driving down returns, investors begin to look to smaller markets to boost returns, increasing competition in markets like Quinte and reducing returns here.
Investors interested in Quinte income properties should keep a close eye on market conditions and cap rates in Toronto because changes there will eventually spill over into our market.