Canmore airbnb | Where to invest in Canada
Note that the information provided herein should not be considered financial advice. I am not an accountant, and recommend seeking professional guidance specific to your personal circumstances.
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In this series of posts, I analyze individual markets to help understand the best places to invest in real estate in Canada. I take a deep dive into the market trends, municipal regulations and seasonality to understand the investment potential in each market. Today I will look at Canmore, Alberta.
Canmore is a world class mountain destination in Canada. Its back yard features endless hiking, biking and ski trails, is nearby a number of the best ski resorts in the world, and is a 20 minute drive to Banff. As a result of Canmore’s popularity, the town has had to impose a number of restrictions on Short Term Rental properties and property managers. With that said, if you choose the right property in the right location, it can still serve as a great investment opportunity.
Should you invest in Canmore? Are the trade-offs worth it? Read on for the complete break down on on the real estate investment potential of Canmore, Alberta.
Why Canmore?
As a resident of nearby Calgary, I personally love and adore Canmore. I love to bike, hike and snowboard, which makes Canmore the perfect weekend getaway locale. My family and I often make day trips to town for a quick trip to the mountains, or stop in town for a bite on our way out or home from an outdoor adventure. The town has a vibrant downtown with lots of great shops, and is a fantastic retreat in any season. Summer has it full of bikes and people walking the streets in the local shops and restaurants. In the winter, it transforms into a winter wonderland. Quite simply, it is a wonderful place to visit or even to call home. I often prefer it to Banff - something about it gels with my personality and interests. And judging by the traffic, I am certainly not alone! In any case, it is a must visit on any trip to the Canadian Rockies.
Market growth and saturation
Ref: AirDNA
Canmore has a significant tourism industry, with visitors both globally and locally. The rental market has grown consistently before and through the pandemic, averaging 2% growth per quarter for new rental units. At the time of writing, there are over 1,700 active short term rentals operating in Canmore. Given the small footprint of the town limits, this means that available rentals are very densely populated.
Ref: AirDNA
Demand seems to be keeping pace as new rentals come online. This growth in demand is especially notable since the beginning of the pandemic, and will be very interesting to see how things change as more broad travel returns to normal. The blue dots on the graph to the right indicate the number of properties booked, which has grown quite consistently over the last few years. Overall, the market seems to have found some stability, with rental demand mirroring supply. This stability is a good sign when thinking about saturation - that both supply and demand are moving together indicates that supply is not over saturated at the moment. As we will see with the municipal regulations below, this could be a very good sign for investors that get in now and can meet the legal requirements.
Ref: AirDNA
The average daily rates have also continued to climb, further illustrating that demand is strong despite the growth in supply. If you are able to find a property that can perform above the median in the market, you will certainly demand very strong rates.
A note on home prices
Ref: https://www.canmorebanffrealestate.com/blog/april-2022-market-snapshot/
There is no getting around it. The cost of entry in Canmore is high. Very high. In fact, the average sales price on a detached home is now over a million dollars, and significantly more in some cases. This fact alone may make Canmore a non-starter for many investors. If you can muster the cost of acquisition, we strongly recommend a very careful analysis on your expected revenue numbers to ensure that the property can demand and sustain cash flow across all seasons.
Ref: AirDNA
Seasonality
Canmore tourism is quite strong year-round, however does see a boost in summer months. Despite the volume of available short term rentals on the market, those properties in the 75th percentile and above seem to hover in the 80% occupancy range or better. However, properties in the 50th percentile or lower suffer through the winter. This means that it is even more critical to ensure that your property is well managed, up to standard in level of finish and amenities, and marketed well. Any slip in these factors will mean that your cash flow will struggle to keep pace.
Ref: AirDNA
Revenue potential is strong in Canmore, and is reflected in the data. The market average for a 2+ bedroom home is around $4,000/month, with top performing properties seeing much higher than that. As always, it is incredibly important to deep dive in to the specific niche that your property occupies. Number of bedrooms, guest capacity, and specific locations will all play an important role in determining your expected income potential.
Given the overall high cost of entry and revenue expectations, you should carefully consider the numbers before making an investment. The potential is certainly there with the right property, however not all will be a slam dunk.
Municipal regulations
The Town of Canmore has an established position on Short Term Rentals, largely due to the high rates of tourism and transitory residents in the area. In attempts to control STR growth, city officials have imposed many restrictions on the zoning of STRs and added progressive increases to the tax rate. It is also important to note that the Town has been aggressive in enforcing the imposed bylaws, and actively monitors STR sites such as Airbnb and VRBO. Perhaps just as important to the rules in place is the language used in the bylaws - they have clearly taken a tough stance against short term rentals. I would expect enforcement to be strong, and additional bylaws to be introduced over time as they work to protect and control their market.
With the zoning and taxation rules in mind, Canmore does not currently impose additional regulations on occupancy, property management, parking or inspections. This is a great positive at least as it stands today. Once you have overcome the zoning hurtles and established your STR legally, you should be free to manage your rental as you see fit.
The break down below is current as at May 2022. We’ll keep this updated as things change!
| Category | Canmore bylaws | Rating |
|---|---|---|
| Current State | > Overall, the Town of Canmore has enforced strict regulations on STRs. The high tourism rate in the area is the primary cause, as is the high rate of transitory residents. Although regulations are not as friendly to STR operators as some neighbouring communities, those that work within the rules can still run a profitable business. |
B- |
| Licensing | > A business license is required to operate a Short Term Rental in Canmore, at a cost of $600/year for non-residents. |
B |
| Building Code & Inspections | > No specific building code or inspection requirements. We actually prefer some regulation here, as it can weed out unsafe and poorly managed properties. | B- |
| Parking | > No parking requirements at this time. | A+ |
| Taxes | > No land transfer taxes in Alberta.
> Tourist Homes are taxes at a higher rate than residential housing. The Town calculates a "mill rate" at 9.39371, compared to 5.06302 for residential. > Annual property tax calculation is: Assessed Property Value X Total Mill Rate / 1000 = Tax Levy. For a $500,000 property, this works out to approximately $4,700 per year. |
C |
| Zoning | > STRs must be zoned as a "Tourist Home". Not all districts are eligible, or must be re-zoned accordingly. > Zoning overall is not overly STR friendly, as evidenced by the following statement on the municipal website: "Tourist homes are currently prohibited in the vast majority of residential districts in Canmore." |
C |
| Occupancy | > No occupancy requirements at this time |
A+ |
| Property Management | > No property management requirements at this time. | A+ |
Competing markets
Canmore is unique in that the area itself is a major draw. Although Banff provides the most direct competition in proximity, it serves the tourism industry more traditionally with strong hotel and motel presence. Canmore and Banff National Park are extremely desirable destinations, and really do stand on their own as best in class. With that said, other markets in BC do provide an alternative. Areas such as Invermere, Golden and Revelstoke all offer similar mountain town experiences. With that said, Canmore and Banff sit at the top.
Summary
In the end, Canmore is a highly desirable tourist destination. As a result, the town has had to impose strong regulations on land use and the introduction of new short term rentals. If you are looking to invest in the area, be prepared to pay a premium for a property and be sure to carefully do your diligence and market analysis. If you get it right, there is fantastic income potential in one of Canada’s most beautiful locations.
I personally love Canmore and would look at it in the future if the opportunity was right. What about you? Would you consider Canmore? Do you already invest there, or visit regularly? I’d love to hear what you think!