Is anyone else in a boring stable market like Halifax that just went on a wild ride, but in reality not much will change other than houses won’t be listed for 500K over what they should be, just inline with what they are actually worth.

I will make a disclaimer, that this message is based on my opinion, do not base your real estate financial decisions on my ramblings, do your research and do what fits with your business model.

The number one rule that seems to get forgotten in a heated market is: do not buy real estate based on emotion.

I have been investing in Halifax for over two decades and with hind site would have likely made different decisions on my projects that never happened.

Halifax Nova Scotia is on the east coast of Canada. A fabulous place to raise a family and as a friend once said it is big enough for a symphony, but too small for an affair. The kind of safe place where areas of wealth or of note like the house that belongs to the American Consulate in my neighborhood does not require gates. People are friendly, but keep to themselves all at the same time. Many Hollywood celebrities have hid out here in plain site. The economy is a mixed bag with tech seeming to be the growing market of today. Lots of jobs, many on the lower part of the pay scale (hospitality, tourism, general labor), however, the location makes it a short plane ride to major centers like Toronto, Montreal, Ottawa & beyond, also direct flights are available to places like Germany, England & France, so with the work from home and downsized office movement it is attracting higher skilled and paid workers from around the world, which has boosted the income of many local businesses.

The solid base of the economy comes from Halifax being a military, university, research and hospital community with well known universities like Dalhousie, which offer programs like law & medicine as well as famous hospitals like the IWK Children’s hospital and of course the main part of the Canadian Navy is in Halifax (these organizations provide higher paying jobs). These type of organizations also mean lots of people come and go, which is good for the residential housing real estate sales sector as well as single family rental market.

The great part about the Halifax area is that you are close to everything. Halifax itself is a peninsula, so other than peak traffic times you can easily get on and off of the peninsula.

The peninsula is comprised of many sections, the most expensive is the Southend due to its proximity to the universities, hospitals, clubs like the Waegwoltic Club, this also makes its neighboring community of the West end quite expensive as well, but not uncommon to see a 200K difference between the Southend and Westend boarder.

Central & Northend have been gentrifying for years and I mean slow (we take it easy here on the east coast)

Then off the peninsula you have areas that are gentrifying and gaining new appreciation. Still lots of available land off the peninsula for new homes. The approval process is slow (like anywhere).

There is also two bridges that lead to an area named Dartmouth which used to be its own city before amalgamation. The downtown area in the past was viewed as a bit dodgy, but now is becoming trendy. Outside of Dartmouth is growing fast as well. Lots of land available and slowly being developed.

Ok, so lets get to the point, over the years we have had several times where prices have spiked. I can only speak to my observations over the past 20. One such time was back in 2001 – 2008 we experience a market correction. House prices were flat the previous decade and now all of a sudden they were on the rise. The mortgage business became competitive, interest rates started to drop, terms became longer (right up to 40 years). I can remember my first mortgage I was able to secure a fixed rate of 7.7% with 5% down over 25 years and I was ecstatic, many folks I spoke with at the time told me how lucky I was to get such a great rate. Then the next was around 5%, then 4% then 1.5 years ago I renewed the mortgage on my personal dwelling at 1.3%. A lot of money earned in our portfolio over the past decade has been thanks to low rates.

This was a great time to flip houses. You could buy put some lip stick on a property and sell for a higher price, no real talent required, just a weekend watching HGTV.

Then the crash happened, everyone freaked out. Did this mean lower prices for Halifax? Unfortunately not really. I mean houses were selling for much more in 2008 than in 2002, but they never went back to 2002 prices. Now right before this crash, which seems similar to what is happening now is a lot of folks are way, and I mean way over paying for homes (I will note that just prior to the crash a person with good credit could get zero down mortgage with a 40 year amortization).

This has created a fictitious market. You need to remove the fake inflation before you determine if housing values have decreased by any or any substantial amount.

I will give a local example: a bungalow (new construction) in Spryfield sold in 2013 for $315000 after being on the market for over 300 days. then it was listed at $499900 in November 2021 and sold for $561000 and sold in 17 days.

The house is nice, in a newer neighborhood next to the gentrifying community of Spryfield and about a 20 – 30 minute drive to downtown Halifax. It is in an area with a lot of land and housing construction going on, so supply is solid.

In this case houses like this (and there are plenty around it) will need to be listed at a regular market price in order to sell. I would suggest that yes, the price would be higher than what it was purchased for in 2013, however, even the list price of $499900 seems over inflated. for 2021.

When houses like this suddenly get listed for $449900 the headlines will read something like “house prices are crashing in this Halifax neighborhood”.

But, the reality is the crash never happened, not even really a price correction (because the asking and sold price are not a reflection of value, just pure emotion).

Now, hopefully these buyers are in it for the long haul and if it is their “forever” home 15 years from now what they paid won’t matter.

The good and pain in the ass part of our current mortgage rules are that you need to qualify for a rate that is higher than what you receive as well as only do a 25 year max amortization, so even in this case these folks are likely ok.

Next lets talk about simple supply and demand:

Housing supply shortage – For many years people moved away from Halifax and all Atlantic provinces. Now people are starting to realize how awesome of a place it is to live and raise a family. Then add an increase in the focus on immigration (programs like the Atlantic Immigration Program) and viola you have a housing shortage that will take years to catch up to. This is being felt in the rental market as well as the single family home market. A simple issue of supply and demand.

I know what you are waiting for, opportunity, well here is where I see potential for good deals in the next few years:

Small multi-family residential – unfortunately some inventors may have gotten caught up in the hype and between the rent cap, rising insurance, property tax, interest rates, combined with an inflated purchase price, may make holding onto a small rental property either a huge drain on personal finances or not feasible at all. Fringe markets where rents tend to be lower will be a great place to look.

Larger multi family – as lending rules tighten up, larger multi-family and commercial properties will likely go back to being valued based on ROI, not emotion. The opportunity will come from buying from those in a similar situation to the small multi-family buyer. Especially out of town buyers that have purchased harder to manage properties for a high price. They may want out. Rural markets where rent increases are restricted based on local market conditions would be especially good to look at. Some investors may have purchased based on the expectation of upgrading the units and charging much higher rents. Unfortunately in many areas around and outside of Halifax finding qualified tenants who are willing to pay higher than usual rent for an area might be a challenge.

People who migrated from other parts of the country wanting to move back home – I believe Halifax and Nova Scotia as a whole is an amazing place to live and raise a family, however, I also question the decision by so many (most from Ontario) to blindly move from another province and buy into the notion they will be living happily ever after. It is a slower pace, and yes the people are friendly, but only if you are not perceived as an arrogant wind bag (or a type of personality that would get you alienated from many people in Nova Scotia).

I am not so sure many of these people will want to stay long term and will be looking to sell fast to go back home. A contributing factor beyond loneliness / not fitting in could be a requirement to return to the office or wanting to be back closer to family.

Well to sum up my two cents. Those hoping for a housing price crash on properties in the Halifax area are likely going to be disappointed.

That being said if I have learned anything at all over the past few years, anything can happen and the only true prediction I can really make is that the real estate market is unpredictable.

Now, I have not included anything to do with a potential recession, once again we have a heavy concentration of government, military, healthcare and education jobs, so we are a bit insulated from major economic downturns, but that is a topic for another day.

The bottom-line is that with patience and capital ready to deploy you can find opportunities anytime. Do you own research, don’t get caught up in any hype (positive or negative) stick to the fundamentals of your business model. Do what works for you.

Until next time,

Design your landlord experience,

Michael P Currie

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Photo Credit Goes to Amanda Klamrowski