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Turner Drake & Partners Ltd.
6182 North Street
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Tel.: (902) 429-1811
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Fax.: (902) 429-1891

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Toronto, ON.
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# Wednesday, December 15, 2021

Accurate Space Requirements:

Carefully study your real estate needs. When budgeting, it’s important to consider not just the purchase price (or if leasing—the base rent), but also any additional costs associated with the property. It is easy to overlook or underestimate extras such as: renovations, due diligence costs, legal fees, production downtime during the transition, recurring operational expenses for the property and (in the case of a lease) possible leasehold improvements. The lender wants to see evidence of solid planning. Determining whether you want to buy or lease and how you’ll accommodate projected growth is important in determining  your square footage needs.


The Subject Property:

If you don’t already have a property in mind, a lender may agree to a preliminary meeting to give you a ballpark idea of how much financing it could provide. However, such a meeting is generally advisable only if you already have a good relationship with the loans officer. You can leave a poor impression if it looks like you’re not a serious buyer and are wasting the lender’s time. Lenders decide how much to lend based not only on your finances, but also on the type of building, and its condition, age, resale potential, ability to generate a cash flow (which will support the debt service and marketability). Without a specific property, it’s hard for a lender to be precise on how much financing it can offer.


Business Plan:

Do you have a property in mind? You should. Prepare the documents you’ll need to show the lender. These will include a solid business plan, up-to-date financial statements, and details of the property you’re interested in. You should plan to make a good first impression and be well prepared.


How do your books look?

Start by making sure your company’s finances are in order and organised. One of the most important requirements for getting financing is having a profitable and growing company. A business with no profitability hurts your chances at obtaining a loan. Lenders like to see a proven record of profits year over year.


Meet the lender to clarify the terms and conditions:

It’s best to meet the lender before bidding on the property you have in mind, especially if it’s your first venture into commercial real estate. The lender will also advise you on its conditions for granting financing. Those may include obtaining environmental and building condition assessments, an appraisal, and a title search. It helps to use approved experts for this kind of due diligence, and each lender has its own list of such experts. If you use someone else, the lender may require a second opinion and the transaction could be delayed.


Don't rush the conditional period:

Your purchase offer should give the lender enough time to review the terms of the deal. It’s common for offers to provide 4 weeks of “conditional acceptance” while lenders often need six to eight weeks and possibly more (especially if due diligence issues arise). The last thing you will want to do is ask for an extension, especially on a “hot” property or “remove conditions” without having the full approval from the lender. 



James Dunnett is a Consultant in our Brokerage Division and has extensive experience in handling complex leasing and sales transactions. If you need help with your commercial property acquisition or leasing requirements, James will be happy to assist you through every step of the transaction. Contact him at (902) 429-1811 or jdunnett@turnerdrake.com.
Wednesday, December 15, 2021 11:02:14 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, November 22, 2021


During the first week of November, the reminders were everywhere: “Change your clocks, check your batteries”. The end of Daylight Savings is a great time to check your smoke and carbon monoxide detectors to ensure they are in good working order. Although the majority of properties are equipped with this equipment, many are overlooked. Functioning smoke and carbon monoxide detectors are critical to fire safety and reduce the risk of fire related death by nearly 50%. Another key aspect of fire safety is having up-to-date Fire Emergency and Fire Exit plans. When was the last time you reviewed yours? 


According to the National Fire Code of Canada, the fire safety plan of a building must be reviewed at least every 12 months, but in reality, your fire plan should be reviewed whenever there are changes to the floor plan. As noted in our April blog post, changing trends in remote work have created opportunities to alter workspaces, renovate offices, or even convert buildings to adapt to today’s commercial real estate environment. It is important to review your Fire Emergency and Fire Exit plans whenever these changes take place to ensure they are an accurate representation of your space’s current configuration and use. An outdated fire safety plan may be of little help in the event of a fire. 


Having a fresh look at your Fire Safety Plan can also identify opportunities to make changes to your fire safety equipment—especially if your property is undergoing renovations. Regular reviews of your fire safety plans also helps to ensure adherence to evolving building codes and fire safety regulations.


Don’t have a Fire Emergency or Fire Exit plan? Our Lasercad® division can assist in creating or updating these by measuring the space and laying out a clear exit path, as well as identifying the locations of safety equipment for your tenants.



Christine Spurr is a consultant in our Valuation Division and is involved in many of our Lasercad® projects. For more information about our range of Lasercad® services, feel free to contact Christine at (902) 429-1811 or cspurr@turnerdrake.com.


Monday, November 22, 2021 11:28:42 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Wednesday, November 3, 2021


HST Self-Supply on new apartment buildings has been around for a long time. We were first introduced to the world of HST (or GST as it was then known) back in 1990 at a seminar put on by one of the leading accounting companies to help the appraisal profession adjust to the new rules.  GST was officially launched in January 1991 and the world of Self-Supply was unleashed. For the first 35 years or so it lay relatively dormant with scarcely a call to our offices from new apartment builders, who are the most affected by the new rules. Rarely were we consulted on Self-Supply valuations.  Everyone was seemingly happy in apartment land. But the last 5 years has erupted with calls coming in on a regular basis from clients old and new, anxious to escape the inevitable battle with CRA’s auditors and appraisers. (For those looking for a tutorial, see our blog post of August 24th, 2016, “HST Self-Supply Rules: Is CRA on the Warpath”.  And feel the pain).

 

Undoubtedly the biggest practical problem for apartment builders is the uncertainty it leaves after the building has been completed. HST on new buildings is based on “Fair Market Value”, not on the cost of construction.  The latter is easily calculated because ITC’s (Input Tax Credits) will have been filed with CRA throughout the construction process. The former – “Fair Market Value” - cannot be calculated until the building is completed and it is, like any market value figure, just an opinion.  But CRA’s opinion increasingly is at odds with the builder’s opinion. To make matters worse, CRA’s review will come along well after the building has been finished, and therefore well after the mortgage financing has been committed, and occasionally even after the building has been sold.  In jurisdictions with regulatory rent controls, rents too will have been committed. In short, the final HST tax bill comes in well after all the dust has (literally) settled. Too bad that it can’t be agreed in advance, or based on something more predictable than “Fair Market Value”.


 "Just levelling the playing field..."

The reasoning behind the Self-Supply rules is succinctly laid out in an official CRA publication (GST/HST Memoranda series 19.2.3, paragraph 5) which begins “Purpose of self-supply rules: level playing field”. In essence, it is an attempt to put the builder who wants to keep the building on the same footing as an investor who wants to buy it. The selling price will (fingers crossed) include a profit component for the builder and that’s what CRA wants a piece of.  It’s difficult to argue with the principle, but what it overlooks is that HST is just another construction cost to be recovered through the eventual selling price. If HST is charged on the elusive profit component, it simply adds to the cost of the building and hence adds to the selling price. The builder pays tax on the profit and recovers it from the purchaser as part of the selling price. The playing field is level. But if no tax is charged on the elusive profit component, the cost of the building is marginally lower and, assuming a balanced market, the selling price will be marginally lower.  The playing field remains level, just slightly smaller. CRA’s concern is that the tax on the builder’s profit will simply end up in the builder’s pocket, but a competitive market will address that. Viewed from that angle, the pain, anguish and sleepless nights endured by the builder waiting to settle the tax bill with CRA is more to do with the size of the playing field than its degree of tilt. All of that pain and anguish could be removed if the tax on profit were a predictable formula, agreed in advance, rather than an elusive opinion coming after the show is over.


HST on Apartment Rents

So, what if the profit – or rather the tax thereon – is occasionally underestimated? Eventually it is the end user who pays the HST on goods and services anyway. That’s how value-added taxes work. For apartment buildings that means the tenant ultimately bears the cost of the builder’s HST, even though residential rental property is, for the most part, officially exempt from HST. Rents must be sufficient to recover all of the costs or else buildings don’t get built. So that troublesome tax on the builder’s profit ultimately shuffles through to the tenants.  Is it a bad thing to give tenants a break these days?  And for more on THAT debate, check out our recent June 21st blog, “Affordable, Attainable, Available”. 



Lee Weatherby is the Vice President of our Counselling Division. If you'd like more information about our counselling services, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com
Wednesday, November 3, 2021 3:32:11 PM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Counselling | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Tuesday, August 24, 2021


Boy howdy, let me tell you how tempting it is today to write another blog post about housing, what with a new majority provincial government, and the shameful campaign of homelessness evictions launched by HRM. It's a topic we will be sure to revisit soon, but the honest truth is a while ago I started writing this piece about a different issue in pressing need of attention, and there just is not the time to pivot. 


That other issue, of course, is the long emergency of climate change. A long emergency that is rapidly becoming shorter according to the recently released 6th Assessment Report of the Intergovernmental Panel on Climate Change. The outlook is grim, with some irreversible effects of climate change now baked into our future, and an ever-diminishing window of opportunity to take action and head off the worst. This is ‘code red for humanity’ as put by UN Secretary General, Antonio Guterres.


A few months ago, I turned 35. Old man, I know. But even from here, just past the threshold of maturity, let me tell you that aging is a hell of a trip. With a few decades and milestones under my belt, I can now regularly perceive the arc of time, but still hold clearly in my mind the memories of early childhood when nothing existed beyond the “now”. I can vividly remember, for example, sitting in the school library in Grade 4 and learning about the Montreal Protocol and how it reversed the depletion of the ozone layer (something very topical to a pasty redhead with British genes). I remember learning how something called the Kyoto Protocol was going to help prevent a different environmental crisis called Global Warming. It felt like an imperceptible eon away at the time, what a different world we would be facing if that had panned out.



My daughter turned 5 this spring and at the moment her “now” is a lot more focused on Covid than climate, but that will probably change soon. That long arc of time leading to climate-driven environmental and social crises has converged with the now. As the IPCC report lays out, our window of opportunity to shape future impacts and head off the worst is running out. Not in imperceptible eons, not in generations, but in a decade (singular), in near-term political cycles. In all likeliness, I will know whether or not my daughter is inheriting a disastrous +2°C world before I know whether or not she’s passed her driver’s test.


But even that sentiment downplays the issue. In fact, we are already living with the impacts of climate change and it’s easy to find the real estate angle. Earlier this week our social media accounts shared this article from the CBC examining the lack of climate risk information in the typical real estate transaction process. The topic is presented against the background of raging wildfires in the BC interior, which have destroyed numerous homes and disrupted even more communities. This is already leading to some early musings that the housing markets of Vancouver Island could see a groundswell of demand pressure over the long term as people are increasingly motivated to move upwind of areas where “50-year fires” are now happening multiple times in a decade, threatening life and shelter, and choking out the rest.


So far, the smoke is dissipating before it reaches this side of the continent, so our concerns are not so focused on forest fires (though, not to be ignored). Sea level rise and flooding are the risks du jour. We’ve visited this topic a number of times already, in research articles from 2006, 2007, 2013, 2016, and most recently 2019. It’s a subject that we care about and have integrated into our valuation practice, adding a climate risk section to our standard reports just a few years ago. But as one small firm in this big industry it is difficult for us to push that envelope.


Well, reality is on its way to force the issue. Back in the fall of last year the National Bureau of Economic Research published a working paper from a couple good eggs at the Wharton School examining the capitalization of climate risk in real estate prices. More specifically, their analysis of home sales in coastal areas of Florida noted that properties more exposed to the risks of Sea Level Rise started to see lagging sales volumes in the early 2010s, with price appreciation starting its underperformance a few years later. Their conclusion is this is a demand-side trend, buyers are now thinking about climate change in the timespan of their own mortgage term! Here’s the money chart:


This trend is just starting, and with the IPCC telling us that a +1.5°C world is now unavoidable, it will only grow in impact in the years to come. Not eons, not generations, years. We’ll continue to look for ways to integrate climate risk assessment into our work, and we recommend that anyone considering a real estate acquisition these days do the same. Even if you don’t expect to own the property long enough for sea level rise and other climate impacts to physically threaten your asset, the next buyer sure could be, and property values look to be a leading indicator now, not a trailing one. In other words, without due care, your mortgage could be underwater long before the property itself is.




Neil Lovitt is the Vice President of Turner Drake's Planning and Economic Intelligence divisions. He engages in numerous consulting assignments, including non-market housing feasibility studies, Housing Needs Assessments from coast to coast, land inventory analyses, and infrastructure studies. To see how you can benefit from the unique expertise of our Planning and Economic Intelligence team, call Neil at (902) 429-1811 or nlovitt@turnerdrake.com.

Tuesday, August 24, 2021 1:02:49 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Turner Drake
# Friday, July 30, 2021

June 28, 2021 marked the twenty-eight year anniversary of my employment at Turner Drake.  Time really does fly when you’re having fun.

Originally hired, trained and educated as a commercial appraiser, I’ve spent the majority of my career in our Property Tax Division. True to our in-house training program of the time, I was hired freshly graduated from University; started as a trainee valuer; moved into a Manager’s role six years later, and then, commencing in 2006, became divisional Vice-President, where I lead a team of six. That team assists hundreds of owners every year in mitigating their tax burdens. 

Twenty-eight years in property tax translates into tens of thousands of appeals filed and, over the course of addressing those appeals, some recurring themes have emerged. I’ll discuss them below…and in the process, try to do a little bit of property tax myth-busting.

Thou Shalt Not Covet Thy Neighbour’s Assessment

If you own property in Nova Scotia, it’s tempting (and, with the information available online free-of-charge, relatively easy) to compare your assessment to competing properties. For some owners I’ve encountered, logging on to assessment sites and feverishly clicking on surrounding properties has become sport…in some cases, bordering on an obsession.

While comparable assessments are undeniably a useful benchmark, as well as a helpful tool to identify an over-assessment (we do it too!); and while some assessors will even consider assessments on similar properties as grounds for reducing an assessment at the (relatively informal) initial appeal review stage, the fact that your assessment compares unfavourably to others will carry no weight before Nova Scotia’s administrative Tribunals, Boards, and Courts.

Nova Scotia’s Assessment Act requires uniformity of assessment…but legislated uniformity is achieved across entire classes of property in a Municipality (and there are only two such classes of property: residential and commercial). Sadly, ensuring that your property’s assessment is consistent with similar properties does not ensure uniformity.  This is one of the most common misconceptions that we encounter in dealing with property appellants.

And don’t even get me started on New Brunswick, where there is no uniformity or equity provisions in the assessment legislation- none! Comparable assessments have zero evidentiary value. Sad, but true. There are reform moves afoot to address the issue, but given the current glacial pace, I may be another twenty-eight years in before they come to fruition.

The Best Opportunity to Reduce Your Assessment (and Taxes) is NOT on Appeal

In every Province in which we operate, assessing authorities are willing to discuss assessments prior to those values being inserted onto the official assessment rolls. In our experience, such preliminary consultations often produce better results- at lower cost- that waiting to file formal appeals. A number of provinces- Nova Scotia among them- fully embrace the opportunity to discuss proposed values and to make changes, where required, at the “pre-roll” (referred to also as the “advance notification”) stage.

Of course, it’s not always possible to do so, as values may not be available with sufficient lead time in advance of the filing of the roll. But where the opportunity presents itself, my advice is always to be proactive, and to address a problem before it becomes one.  A stitch in time really does save nine.  

(Nova Scotia owners, take note: the opportunity to pre-negotiate your 2022 assessment- the first assessment year when the COVID-19 pandemic will be technically relevant for assessment purposes- will open in mid-to-late September.  Carpe diem).

Not Every Property is Overassessed

There. I’ve said it. 

It’s the truth- not every property offers the opportunity for tax relief. My colleagues and I take many, many calls where we have to break that unwelcome news to owners…sometimes in spite of a double- digit increase, or an assessment that exceeds its neighbours by a considerable margin, or a revenue stream that has tanked due to the COVID-19 pandemic. In fact, for every appeal we file, there is probably a second property that was reviewed and its value accepted. 

Assessors- They’re Just Like Us.

They worry about mixing vaccines. They wonder about going gluten-free. They drive their kids to countless sport practices and extracurricular activities. They think about work while they’re walking the dog.  They fret about how they look on Zoom calls. And, for the most part, they’re well educated and professional, and open to reasoned argument. That’s not to say that we don’t take the gloves off from time to time. But professional relationships built on mutual respect with assessors from across the country have allowed for the settlement of hundreds of appeals every year without the need for Board and Court appearances.   


Giselle Kakamousias is the Vice-President of Turner Drake’s Property Tax Division. Her experience negotiating and appealing property assessments is extensive: it is a wise property owner who follows her advice. If you’d like more of it, she can be reached at (902) 429-1811 ext. 333 or gkakamousias@turnerdrake.com 

Friday, July 30, 2021 12:55:41 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake
# Thursday, June 24, 2021

Affordable housing has been a hot topic in recent years, and is even more so now as rental vacancy rates are extremely tight and housing prices have experienced record rates of increase in Atlantic Canada.  A recent news article caught my attention, with its reference to a price point – “attainable” – I haven’t heard as much about, and it inspired me to take a look at what the difference is, and how each lines up with Atlantic Canadian markets.  Then, because alliterations sound better in threes, I needed a third A: the obvious choice in this context is to look at availability.

 

First, the definitions, a slipperier thing to pin down than one might imagine.  Canada Mortgage and Housing Corporation (CMHC) defines affordable housing as housing that costs less than 30% of a household’s before-tax (gross) income, absent any requirement for the housing to be provided or made possible through a government program, and without restriction on tenure or type. 

 

With that definition, affordability is very much relative: in theory, a $4.3-million home would be “affordable”, provided your household income is $300,000 – about 1.7% of Atlantic Canadian households.  

 

Relatively affordable: on the market for approximately $4.4-million.  Source: ViewPoint Realty


Seems likely that this is not the intention of the definition, or any measures put in place to encourage the supply of affordable housing.  And in fact, CMHC’s Housing Continuum graphic implies that affordable housing is separate from market housing.  Wikipedia offers a slightly more specific definition:

 

…housing which is deemed affordable to those with a median household income or below as rated by the national government or a local government by a recognized housing affordability index.



Source: CMHC 


If we combine the two, that would indicate that affordable housing is housing which costs no more than 30% of the median household income – and for practical purposes, let’s assume that is in reference to local median incomes, and not, for example the national figure…more on that later.    

 

We conducted a very high-level analysis of the median incomes for the four Atlantic provinces and a selection of cities.  We used average rental rates for 2-bedroom units because this is by far the dominant unit type for rental accommodation.  The calculation is simple (very!): divide 30% of the median household income by 12 to get the monthly income, subtract off the average rental rate and an allocation for utilities of $150 per month (property tax and water are included in the rental rate; electricity/heating may or may not be included, so to play it safe, we assumed that it’s not for most units) and see what’s left over.    Great news: positive balances all-round, averaging $620 per month surplus – hoorah, there’s no affordability issue! 


Data Sources: Environics Analytics via Sitewiseweb; CMHC; Dalhousie University


Here’s the “but”…and it’s not inconsequential by any stretch.  Median household income is, by definition, the middle of the income spectrum.  So, a household earning the median income being able to afford average costs for rental housing tells only half the story.  Our next analysis worked the figures backwards: we took the average rent plus the same allocation for utilities, on an annual basis and figured out how much a household would need to earn in order for housing costs to equal 30% of their gross income – then figured out approximately how many households fell below that income threshold, based on the number of households in various income brackets.  Reports of an issue don’t look overblown at all.   


Data Sources: Environics Analytics via Sitewiseweb; CMHC; Dalhousie University


Prices for owner-occupied housing have increased substantially over the course of the pandemic.  We ran the same sort of analysis as above, for average/median sale prices in 2020 and 2021.  The geographic availability of data is a bit inconsistent, but our aim is a general idea, so overall, the data is fit for purpose.  Mortgage rates impact the cost of housing; we used discounted rates (rather than the posted rates) relevant at the relative times.  To keep things simple, we assumed a 5% down payment, then based on a very unscientific poll around the office cross referenced against an online monthly expenses calculator, we allocated 40% of the mortgage cost to cover property tax, utilities, and insurance costs: rough idea, fit for purpose.


Data Sources: Environics Analytics via Sitewiseweb; CREA; ratehub.ca


We also looked at the year-over-year change in house prices: in 2020, the median income was sufficient to afford a house in all Atlantic provinces, and the selected cities (2020 house price data for Moncton is conspicuous by its absence), but in 2021, the income needed to afford a typical house climbed over the median level for Nova Scotia and PEI, and their capital cities. 


Data Sources: Environics Analytics via Sitewiseweb; CREA; ratehub.ca


Obviously, averages and medians are the central figures: there will be houses priced lower as well as houses priced higher, so the above analysis is not to say that in HRM, for example, you couldn’t find a house priced within your means if your household income is less than $100,000 (though it’s getting trickier, especially with our recent embrace of the “offers over” system of home buying).  But this does provide an indication of affordability, and leads us to the next A on the list: attainability. 

 

Again, the definition is slippery, and in some senses, attainability is defined the same way as affordability, i.e., at no more than 30% of gross household income.  It seems that the key difference is the removal of reference to median income: each income bracket will have its own price range of attainable housing – and associated appropriate housing types, categorized by type, size, and tenure.  Implicit in the idea of attainability is that suitable housing exists in the local market in a variety of forms and price points, sufficient to meet the needs of the population.

 

We used data on household income brackets to model the proportion of households in each province/city by maximum monthly housing budget.  We then used the same $150 allocation for utilities for rental units to determine affordable rental ranges, and the same ratios for expenses-to-mortgage (i.e., 60% of budget is available to service the mortgage, with 40% allocated to property tax, utilities, and insurance) to determine affordable house prices, as were used in the earlier analyses.  All figures are approximate at best and should not be relied upon for life decisions, but they give a sense of what is attainable to each income bracket from a price perspective. 


Data Sources: Environics Analytics via Sitewiseweb


Data Sources: Environics Analytics via Sitewiseweb.  Note that the annual income from a minimum wage job, at 40 hours per week and 52 weeks per year varies by province but all four Atlantic Canadian provinces would fall towards the low end of the $20,000-$39,999 income bracket, averaging $26,000 overall.  


And so we come to the final A: availability. It's an important one, because it's effectively the supply side of the supply and demand equation, which is the driving force behind prices. For this portion of the discussion, we're abandoning price points in the interest of balancing level of effort that can be allocated to a blog post.


One of the components of the attainable definition was that a variety of housing formats would be available locally to serve the various budgets - the CMHC housing continuum graphic gives a rough sense of what this might look like, as does this Housing Life Cycle graphic borrowed from the City of Belleville, Ontario.  

 


From an availability perspective, we start with rental tenure.  With the exception of Cape Breton and St. John’s, vacancy rates are low across the selected cities. 


Source: CMHC (annually in October)


At a provincial level, in October 2020, there were just over 3,000 vacant rental units in Atlantic Canada, of a total rental universe just shy of 114,000 units.  Once those 3,000 units are sliced and diced by price, style, and location, availability is probably problematic. 


Source: CMHC (October 2020)


For residential sales listings, we have to rely on data for Nova Scotia only, due to availability, but we suspect that a similar pattern will be in evidence in the Maritime provinces at least.  Prices continue to climb in 2021, but it appears that the supply-side driving force behind that trajectory may no longer be in play: the number of listings for the period 1st January to 16th June in 2021 was greater than any other year in the past five years, versus 2020, which had the fewest listings of the five years. 


Source: NSAR MLS®


But what about affordability of these available houses?  That’s a question that could have many answers – in that it can be answered in a myriad of ways.  We’ve opted for a very simple one, using price points of affordability for the median household income under two interest rate scenarios: the current posted rate and a current available discounted rate, and ignoring down payments because we’re more concerned with monthly costs in this analysis. We’ve also ignored time – and changes to mortgage rates and income levels over its course, for illustrative purposes (horseshoes, hand grenades, and this blog post).


Median Household Income

$67,115

30%

$20,135

Monthly

$1,678

Mortgage amount @ 1.68% (discount rate)

$410,793

Mortgage amount @ 4.79% (posted rate)

$293,120

Mortgage rates from ratehub.ca


Let’s just pause on the one-hundred-and-seventeen-thousand-dollar difference in what is “affordable” under those two rates.  In some areas, you could buy a house for that.  Maybe not for much longer, if interest rates stay low, but there are rumblings from economists that as interest rates rise, the “affordability” of houses will contract and what some fear is a housing bubble, may burst. 

 

The second half of 2021 is yet to be, so here are the Nova Scotia listing counts annually to 16th June.  A few things jump out:  (1) there were more listings in the first half of 2021 than in the same period of any other year in the past five (we already knew that from earlier); (2) other than at the outset of the pandemic, when home was so distinctively the safest place to be and few wanted to let strangers walk through theirs, 2021 had the fewest listings below the posted interest rate affordability threshold; and (3) 2021 had the fewest listings below the discounted interest rate affordability threshold, full stop. 


Source: NSAR MLS®, with affordability thresholds calculated using data from Environics Analytics via Sitewiseweb; and ratehub.ca.  

 

Back to that mention of localized median household incomes.  In the absence of sufficient NOAH (Naturally Occurring Affordable Housing: see TDP VP Neil Lovitt’s excellent blog from earlier this year) in the region, programs that encourage affordable units in new developments are an important part of the solution moving forward. 

 

There’s a knife edge on which balances the costs of development with what is affordable to those who need non-market housing.  It is highlighted by reaction to a recent announcement of a sizable federal loan on a new apartment building that will be approximately one-quarter designated affordable units.  They’ll be priced in relation to the median income for the area, which has generated a fair bit of blow back (to be fair: the perception of how widespread negative reviews of policy are is almost certain to be skewed, since those who really disagree are far more likely to speak out against it, while those who agree or are neutral have less incentive to chime in on the discussion).  The issue they raise is that the local (Halifax) median income referenced is close to $90,000 (as in, one large Costco order close to), so the affordable units could be priced as high as $2,238, though most are actually going to be less than that since the agreement includes provision for a further discount to the 30%‑of‑median‑income standard.  The underlying questions in the flak are really: is median income a reasonable metric on which to base affordability measures?  And what median should be used?  And is there any relationship between the maximum “affordable unit” price tag and unit size?  One-bedroom versus four at $2,200 is a pretty substantial difference.

 

There’s a geographic driver of housing prices, and it costs more to commute less, generally.  Maclean’s magazine published an analysis in 2014 that showed a minute of driving time could save you thousands in housing costs.  Inspired, we devoted a TDP Trends to the topic; with some variation, in general, the farther you get from the downtown core, the less expensive houses are.


Source: Turner Drake & Partners Ltd. (2015)


This is relevant to a discussion of housing that is affordable, attainable, and available because cars are expensive to own and operate.  Pushing affordable housing to the far reaches of the city, where transit options are limited/nil (and don’t forget that commute times via bus are going to be longer), is short-sighted at best, and counter-productive at worst.  But median incomes are likely higher where housing prices are higher, whether that’s localized within a city, or the city median is used in lieu of the provincial one. 

 

Is there a conclusion?  Not in terms of a solution.  But an acknowledgement of the complexity of the issue, and the fact that a broad stroke approach to the metrics may provide little in the way of assisting those who need support to find and keep suitable housing that fits both the budget and the family structure.  That, and the fact that  “affordable housing” as defined, is only of use if it is also attainable and available. 




Turner Drake refines high-level, surface-scratching analyses like the foregoing, into fine-grained, location specific consulting assignments, including market and non-market housing supply and demand analyses throughout Atlantic Canada, and Housing Needs Assessments from coast to coast.  To see how we can provide solutions to your real estate problems, you can reach Alexandra Baird Allen at (902) 429-1811 or abairdallen@turnerdrake.com. 


Thursday, June 24, 2021 11:42:31 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Wednesday, May 5, 2021


After listing a property for sale, you receive an offer from a prospective buyer. Then, before you’re able to present the offer to your seller-client, a second and third offer arrive with all of the buyers and their agents impatiently waiting for answers.


While handling multiple offers requires more diplomacy than handling a single offer, from a business standpoint there is really little room for complaint here. You have an attractive listing, which has a good chance of selling quickly, and your marketing efforts are paying off, which should please the seller.


However, there is plenty of room for problems if you don’t handle the intense demand for your listing with diligence and fairness to all – your seller-client and the prospective purchasers.

 


Verbal Offers Are Not Competing Offers

All offers must be presented in writing. If a seller’s agent is presented with a verbal offer, the seller must be told what was offered and the buyer’s agent must be instructed to put the offer in writing in order to be considered.

 


Disclosure to the Buyer

In Nova Scotia, the decision to disclose the existence of competing offers to buyers is entirely up to the seller.

Should the seller receive competing offers, the seller’s agent should:

  • inform the seller immediately;
  • recommend the seller review each offer prior to making a decision;
  • disclose the presence of competing offers to the buyers’ agents if the seller agreed to do so, however the content of the offers must remain confidential;
  • attempt to have all offers presented to the seller in the same time frame. The seller can delay the presentation by providing written consent; and
  • advise the seller of their options, such as:
    • accept one offer, reject all others;
    • counter one offer and set others aside pending the result;
    • reject all offers;
    • accept more than one offer with any offers after the first as back-up offers. Any back-up offers must remove the seller’s obligation from the first contract when moving on to the next through a condition included in the counter offer, such as “seller’s acceptance of this back-up offer is subject to the seller ceasing to be obligated in any way by [date] under the previously accepted purchase contract. This condition is for the sole benefit of the seller.”

 

Representing Buyers

The buyer’s agent has a duty to disclose competing offers and any terms that are known to them, but ultimately buyers might not be made aware of competing offer situations; that decision rests with the seller. If the seller does disclose that the buyer is in a competing offer situation, the buyer’s agent should:

  • immediately inform the buyer;
  • advise the buyer of the seller’s options;
  • ask to personally attend the offer presentations; and
  • advise the buyer of their options, such as:
    • increase the offer prior to presentation;
    • leave the offer as it is;
    • withdraw the offer; or
    • reconsider the fixtures, chattels, terms and conditions of the offer prior to presentation and have these changes reflected in writing.

 

Tips for Buyers

Once the buyer is made aware that they are in a competing offer situation, they may want to increase the offer price and/or reconsider a term or condition in effort to compel the seller. Financing and inspections are both examples of conditions that buyers could remove in effort to improve their offer. Doing so however, increases the level of risk for the buyer.

 

Price:

What can the buyer realistically offer on the property? Is the property appropriately valued? Buyers should understand the long-term risks of increasing their offer price and what impact it could have on their financials. Further, buyers should understand that increasing their purchase price above the asking price does not guarantee that their offer will be successful.

 

Property Inspection:

Buyers may be tempted to remove the inspection condition in an effort to present a more appealing offer to the seller, but there could be major risks involved in doing so. Property defects and major repairs are an expensive reality in many older buildings and foregoing the inspection will prevent the buyer from having a clear understanding of the current state of the property. Buyers are recommended to use extreme caution when deciding to remove an inspection clause for this purpose.

 

Financing Pre-approval:

If you don’t know exactly what you can afford, you may be looking out of your price range and wasting your time. You may also be looking below what you would have qualified for and not getting the right investment property for you.

If you start off by getting a pre-approval on the other hand, you can sort by price, identify the right neighbourhoods, and find your desired property much faster.

 

Offer & Acceptance:

There is no contract until all parties agree to its written terms, sign their names to express that agreement and communicate acceptance to the offering party. Until then, you have nothing more than a stack of offers – not a stack of contracts – any one of which could appeal to your seller-client. Do not advise a buyer or a buyer’s agent that the seller has accepted the buyer’s offer until the seller has signed the offer. A seller who orally expressed a willingness to accept an offer has not yet accepted the offer and has no legal obligation to do so. Thus, no contract has been formed.

 

The Back-up Offer:

When one offer is accepted, your client may be willing to negotiate another as a “back-up”. Of course, this would require agreement by the second buyer and would require special language indicating that the back-up contract has no legal standing unless and until the primary contract is terminated.

 

Only One Winner:

Unfortunately, in the case of multiple offers for one property, there will be those that lose. Someone will walk away disappointed for not having been able to buy their ideal property, but if everything is handled in an equitable manner, the seller should NOT be the losing party, but should walk away with a deal that is in their best interest.



James Dunnett is a Consultant in our Brokerage Division and has extensive experience in handling complex leasing and sales transactions. If you need help managing your leasing requirements, or are interested in purchasing or selling a commercial property, James will be happy to assist you through every step of the transaction. Contact him at (902) 429-1811 or jdunnett@turnerdrake.com.

Wednesday, May 5, 2021 12:10:44 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, April 22, 2021

The Covid-19 pandemic has had a tremendous impact on the commercial real estate industry.  Central Business Districts throughout Atlantic Canada (and beyond) have experienced the greatest impact as the market shifts away from traditional brick-and-mortar office space.  Many large employers anchoring multi-story office buildings have transitioned to a remote workforce to satisfy public health guidelines, while also providing their staff with more flexible working arrangements.  Vibrant, bustling downtowns are now a shell of what they once were – your morning pitstop is now closing its doors and is shadowed by dark buildings and empty parking garages, while office towers are being considered for possible sale, renovation, or conversion to multi-residential purposes. 

With a reduction in office occupancy, downtown districts have experienced a significant decrease in traffic.  During December 2020 our in-house regional market survey found that the majority of urban centers throughout the Maritime provinces have experienced increasing vacancy rates.  Halifax was the only market to see a slight decrease in the rate (of 1.39 percentage points). Downtown St. John’s on the other hand recorded the largest vacancy rate at a whopping 37.46%, substantially higher than that of the greater St. John’s area as a whole, and up 10.93 percentage points (PP) from the prior year. Moncton office vacancy rates increased 8.56(PP) from the prior year while Saint John and Fredericton followed with growth rates of 4.07(PP) and 3.83(PP) respectively.   

On a macro level, Statistics Canada report that the number of firms with 10% or more of their workforce working remotely doubled between February and May 2020. This trend may not be over any time soon, as one in five companies reportedly expect 10% or more of their staff to continue working from home post-pandemic. Canada did experience a decrease in remote working after the first wave of COVID-19, however since October 2020 remote working has increased and in December was sitting at 28.6% according to Statistics Canada.

Although the pandemic has brought a lot of doom and gloom, it has also created new opportunities and broadened perspectives. Our Lasercad® team have had the pleasure of helping our clients pivot and re-focus; assisting them in mapping out socially distanced office layouts in order to “future-proof” spaces, while also promoting continued in-person workflow amongst staff. We have provided landlords and building owners with accurate measurements and floor layouts to aid in managing and renovating their properties.

The long-term effects of the pandemic on local commercial real estate remain to be seen, however preparing yourself and your property for various outcomes is a great start. Having an electronic CAD inventory of your space allows the flexibility to run a variety of scenarios and can be a helpful tool while working with tenants, contractors and buyers. If you would like to hear more about our recent projects please don’t hesitate to reach out. Our Lasercad® team would be happy to discuss your concerns and requirements as you try to navigate these uncertain times. 

Mark Smith is a consultant in our Valuation Division and is heavily involved in many of our Lasercad® projects. For more information about our range of Lasercad® services, feel free to contact Mark at (902) 429-1811 or msmith2@turnerdrake.com.

Thursday, April 22, 2021 11:05:21 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, April 1, 2021

Expropriation is the forceable taking of property by an acquiring authority for a public project, such as a road, transmission line, pipeline etc. In the vast majority of cases, only a small portion of a property is taken, and sometimes only a partial interest is required.  Pipelines, for example, only require a sub-surface easement interest, allowing the owner to continue using the surface for anything that doesn’t interfere with the operation and maintenance of the pipeline itself.  Transmission lines are happy to share, requiring only an easement interest for the towers and the overhead lines.  Regardless of whether the interest is full (fee simple) or partial (easement), the acquiring authority pays compensation for the value of the interest taken, the boundaries of which are defined by a survey plan and a legal description, properly recorded at the Land Registry.

In some instances, however, an acquiring authority may exert control beyond the boundaries of what it has legally acquired.  In Nova Scotia, new highways are usually designated as controlled access highways under the Public Highways Act, imposing potential new restrictions on building setbacks.  A permit from the Minister is required for the construction of buildings and structures within 60 metres (197 ft.) of the limit of a designated controlled access highway or within 100 metres (328 ft.) of its centre line.  That is probably far more restrictive than the local By-Laws require, potentially sterilizing a fair chunk of land alongside the new highway unless Ministerial approval is granted.  In rural areas it probably doesn’t matter, but in urban areas it might, especially if there is a potential for development.  The Public Highways Act does allow compensation for so-called injurious affection resulting from a controlled access highway designation … but not for new highways.  So, any compensation in respect of new setbacks alongside new highways must presumably be claimed via the Expropriation Act, even though the restrictions are authorised under a different act.

Pipeline easements come with similar strings attached.  Oil and gas pipelines are regulated under the National Energy Board Act (which strictly speaking grants orders for rights of entry rather than expropriations).  The Act imposes an automatic 30 metre (98 ft.) Prescribed Area – or safety zone – on either side of the pipeline, within which so-called ground disturbances and construction activities are restricted. Some activities are totally prohibited and others require the pipeline company’s permission.  So, whilst the pipeline company only acquires the easement within which its pipeline sits, it casts a 30 metre shadow on either side.  Compensation for restrictions within the 30 metre safety zone is often challenged but has been awarded and upheld by the Federal Court in valid circumstances.  Again, in rural areas it might have little impact, but in urban areas it most likely will, especially if it interferes with development plans.


Lee Weatherby is the Vice President of our Counselling Division. If you'd like more information about our counselling services, including advice on expropriation matters, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com

Thursday, April 1, 2021 10:37:40 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Counselling | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Wednesday, March 3, 2021


From the tip of the Tuskets to the briny Bras d’Or, Nova Scotia hosts a buffet of islands along the coast and in our many inland lakes.  They provide visitors with a glimpse of wild beauty and an air of mystery; offering fantasies of self-isolation in a rustic cabin, or (in rarer cases) a self-sustaining luxury compound in the sea.

There is no denying the unique appeal of an island property: every trip is a journey and the setting is ripe for peaceful contemplation and an escape (geographically) from it all.  But not all islands are created equal, and one person’s paradise is another’s bare rock suited more to the gloomy vibes of a horror film à la The Lighthouse (filmed, incidentally, in the almost-an-island Cape Forchu near Yarmouth, NS).

On occasion we are tasked with placing a monetary value on islands in Atlantic Canada, and though it feels crude to reduce these special places to dollar signs, our valuation crew is beholden to the oath of Market Values and Highest and Best Use.  So, what factors into such an assignment? Before I jump into my canoe or take to the sky for the inspection, here are some considerations rolling around my head:

Location

The classic axiom of real estate applies most strikingly to island properties.  An island located many kilometres out to sea will attract a much smaller pool of potential purchasers than an island within a leisurely boat ride of the mainland.  For every additional hour spent travelling to an island, the cost of fuel, and risk of weather increases the difficulty in visitation and greatly increases the cost to move construction materials.  For this reason, inland islands (on mainland lakes, or the Bras d’Or Lake) are generally more accessible and desirable than their oceanic counterparts. 

Amenities

What better accessory for your yacht than a private island? Islands located near marina facilities, yacht clubs, and other services are immediately attractive to folks who enjoy Nova Scotia’s sailing culture.  This trend is best revealed in the market for islands between Lunenburg and Chester on Nova Scotia’s South Shore.  Here you will find the most expensive islands in the province, adorned with multi-million-dollar estates including the recently purchased “Kaulbach Island”.  With a price tag of $4,000,000 this property includes multiple high-end buildings, deep anchorage, and a farm to keep you stockpiled in the event of any cataclysm (yacht not included).

Waterfrontage

Sandy beach or granite cliff?  Both offer beauty but it is the former which is sought most by island purchasers.   Valuing an island property often involves two key unitised elements: the “Basic Land Value” captures the uplands which tend to vary in quality based on vegetative cover, topography, etc. and are expressed as a value per acre; and the “Waterfront Benefit” which varies based on coastline material (sand, stone, boulders, etc.), accessibility, topography, and aesthetic appeal; and is expressed as a dollar amount per linear foot of water frontage.  Breaking down value into both the Basic Land Value and the Waterfront Benefit is one of the ways we can leverage past sales of islands (which are inherently unique) to provide an estimate for islands yet to be sold.

Ecological Interest

As with many assignments involving wild places, the cold calculus of valuation has a redeeming quality when it can be leveraged to protect the land for future generations.  In Nova Scotia, organisations such as the Nova Scotia Nature Trust, Nature Conservancy of Canada, Ducks Unlimited, and the Provincial government have created a market for islands which explicitly recognises their ecological significance.  Islands which might otherwise be used to dry fishing gear can be justified with a Highest and Best Use “for conservation use” when there is demonstrable demand for islands hosting birds, mammals, and plant life unique to these coastal oases. 

It’s a small step, but by establishing conservation as a legitimate Highest and Best Use (backed by market data) we are opening a door to recognising the intangible values and relationships we have with land.  It is this humble appraiser’s hope that one day the valuation process will broaden even further, allowing for the legitimate weighing of non-market values and against the rigid confines of what is merely “financially feasible” or “legally permissible”.  Perhaps we can one day pit the spiritual value of land against its extractive value.

James Stephens is a consultant in our Valuation Division and is heavily involved in the valuation of lands for the provincial governments, private land owners, and land trusts including the Nova Scotia Nature Trust, Nature Conservancy of Canada, Annapolis Valley Farmland Trust, and the Island Nature Trust. For more information about our range of Valuation® services, valuations for land donations, feel free to contact James at (902) 429-1811 or jstephens@turnerdrake.com

Wednesday, March 3, 2021 10:32:49 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake  | Valuation