Property Value Assessments and the Year 2013

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The year-end housing numbers are beginning to be released in cities and towns across Canada and the commentary surrounding them has been true to form. Comments like “surprising strength”, “this can’t last”, “shockingly positive year” seem to be the themes we keep hearing. Wouldn’t it be a nice change if everyone just took a breath and looked not just at the real estate prices but also what fundamentals are driving them? Let’s take a quick preliminary (and calm) look at some of the regions:

British Columbia
There is no surprise that the northern part of the province has really started to feel the upward pressure. Jobs are being created, attracting businesses and people from across the country who need a place to live. The confidence, especially in the NE quadrant, is pushing these people towards setting up permanent homes. They are now skipping the typical 2 year rental period we traditionally witness when new migrants move to an area and are jumping into the purchase market in less than 6 months. This has left the housing developers with limited new construction to fill this demand, and as we know when demand increases and supply is limited, prices start to move faster than expected. We are especially seeing prices move in Kitimat, but not for the same reason. We are witnessing a lot of speculation in that market as the expectation continues to be that it will land a number of major infrastructure projects. Also, it is important to note that most of these markets had very low average prices to begin with so it was easy to create large percentage increases.

In 2014 we will continue to see resource towns out-perform most of the lower mainland in percentage growth in both values and rents because that is where the jobs are being created most quickly. In fact, we have seen assessed values in some cities in the province actually drop. The silver lining to that is if you own and don’t plan on selling, it helps to keep your property tax bill down.

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Alberta
There is lots of talk about the floods (“despite the floods…”) with the release of the Calgary year end real estate numbers. And, yes the floods did play a role in shifting demand; we projected the market to not perform as if it were normal circumstances (read our post flood commentary). However, the biggest surprise to everyone should not be the average price increases; the biggest surprise was the massive influx of new residents pouring into the city despite the floods. Once again, jobs proved to be a stronger attracting force than the floods were a repellent one. Rental market vacancies at next to zero, combined with this jump in migrants AND a dramatic increase in luxury home demand, pushed the Calgary market’s assessed values up strongly to pre-recession levels. And yet, we will see these same forces continuing to make Calgary the strongest real estate market in Canada for the coming years.

Edmonton’s market traditionally follows the direction of Calgary’s by approximately 18 months. This is ringing true once again as values were just beginning to make their move during the assessment period, so the real value increases will be reflected in 2014’s assessments. For investors and homeowners, now would be a good time to take a close look at last year’s Calgary market performance to see the direction Edmonton’s is heading. In 2014, Edmonton will once again be one of the top performers in the country – as it was before the recession. Rents are on their move upwards, vacancies are dropping, and job seekers are beginning their move in to fill the low unemployment rate. The next phase we will witness is the inevitable move from rental to purchase, which will see a correlated increase in value.

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Saskatchewan
One of the hottest economies in the country has seen a resurgence in migration to (or back to) the province. This population growth, combined with the development of many resource projects has helped Saskatchewan to be noticed not only by job seekers, but job creators, developers, and investors. All of these factors combine to push the market upwards in 2013. Some would say that there are some cities that are now over-valued compared to the underlying economics; however, we don’t see that to be a long term issue. With the growth we are seeing in the province’s economy, despite the turmoil in the potash industry, the fundamentals will quickly catch up and support these housing numbers in 2014.

Manitoba
What can you say? Winnipeg had another stellar year in the real estate market, not just in rentals but in new developments, in areas of revitalization, and frankly in job growth. The unemployment rate is low compared to the city’s history, which is helping to keep people in the city and giving them confidence to set down roots. While 2014 may not be as much of a massive win as 2013 was for the city’s housing market, with all of the new developments coming on board 2015 looks to be stellar nonetheless. This, to any strategic buyer means a window of opportunity is opening up this year.

Ontario
One must start by discussing the 9% increase in average prices in Toronto on a December versus December basis. Toronto 1itself is larger than some provinces in both economy and population, so it should never be considered one market. One must peel the onion on this market to see some of the underlying sub-markets to identify how the target market is really performing. December was a big month on a y vs y basis for Toronto and will have helped increase the annual numbers for 2013. However, as you dig deeper you will see that land prices are playing a major role in this average value increase. Land values are especially important as there has been a recent surge in demand for lower-rise and ground oriented properties in the city where the value of the underlying land plays a larger role than in a large condo tower. Areas of redevelopment, especially those served by decent transit, will out-perform in Toronto in 2014. With a large number of condo buildings being completed in 2014, we will see average transaction values increase due to the nature of the projects.

For the City of Hamilton, 2013 turned out to be quite amazing, which is no surprise to anyone who follows our research. Resurgence in demand from across the economic and age scale has led to a strong and sustainable market condition across the city. New residential and commercial developments are making their market on the city, and this, combined with companies choosing to create jobs in the region, has led to a new-found confidence and pride in the city. 2014 is poised to be just as strong, as outside factors (transportation improvements and the US economic recovery to name just two) will combine with the new resurgence to keep the market underpinned nicely without causing an over-value situation.

If, in the last 12 months, you’ve asked yourself the question, “Is real estate right for me?” then you’re onto something. Find out if real estate investing IS right for you in our latest report: