So... assessments. Homeowners around these parts have just gotten their property assessments last week. This governement issue document  is mainly about what they think your home is worth and from this number (combined with a slew of other factors mainly about which services are available) they calculate how much property tax will be owed on that property this year.

In my line of work, the assessed value of a property is fairly frequently brought up by Sellers and Buyers alike to justify what they think a given property is worth. It is understandable that the layman would rely on such numbers for their conclusions, but when scrutinized from the perspective of actual market value these numbers do not hold up. But don't worry, they are typically on the low side... but not always.

In May of 2009, I wrote this post but as it is something that continues to come up, I will write about it once again. I will borrow from the post but I will use the latest available information to show that my position is not just something I'm pulling out of a hat.

Before attacking the accuracy of assessed value I want to point out that I think it is understandable why the taxing system works the way it does. I am not trying to blame anyone, I just want to clear up this all too common misconception as it affects people's decisions regarding real estate. This is, of course hte most valuable thing most of us ever own so it's pretty important to have a clear understanding of it.

Quite often people will tell me the assessed value (for taxes) of their property, or they will ask about the assessed value of a property on the market that they have some interest in. My answer is that although the prices are generally in the right ballpark, that they are not usually very accurate and in many cases way off the mark. Not everyone takes me for my word, and thanks to my university years I am in the habit of being able to back up what I claim. So when someone challenged me on it one day I pulled up a large sample of recently sold properties and compared the sale prices to the assessed values and created an average by use of a computer program Realtors have access to.

I just did this again for the purpose of this post. Read on if you are skeptical, curious or the sort who likes stats and numbers.

According to the program us Realtors use known as “Interface”, there were 126 properties that sold in the Nanaimo area between January 1st 2011 and Janurary 31st 2011.  I chose these numbers from a year ago as the new assessment values have not been entered into our database as of yet. These numbers do however show the same pattern as when I did the same thing in May of 2009. There were 3 properties that didn’t have assessed values attached to them so they were removed from the list. I averaged the numbers on all of these listings and here is the pertinent info I found:

Average List Price:               $328,356

Average Sale Price:              $319,168

Average Assessed Value:      $308,805

Of course, we know that the people making these assessments have not been inside the properties so they are only guessing what the places are like inside. As I understand it, hey have a budget that needs to be payed for and they have to find ways to justify the way they collect it. Now before you start complaining, think of how much more it would cost to run the system if they went to each home and made sure it was totally accurate. I don’t know about you, but I’m glad they don’t. Again, I’m not saying the system needs to change, I just think people should know what these assessments are NOT for: pricing a property that’s to be sold.

I might be labouring the point, but here are some of the more notable differences I found in that list of recently sold properties. You’ll notice that they tend to under value the properties rather than overvalue.

Sold Price           Assessed Value

$299,900           $120,000

$198,000           $146,900

$145,000           $176,600

$219,900           $177,000

$130,000          $178,300

$239,900           $187,200

$257,250           $343,000

$305,000          $351,000

$352,900           $299,000

$325,000           $280,100

$175,000           $260,000

$320,000           $205,600

So, if you want a better idea of what your home is worth just contact me. It will cost you nothing but a conversation with me at your place. This is a big part of what I do for a living.

Ryan Coffey

For the armchair market watchers out there, don’t read too much into this in terms of what it means for the local real estate market. Having it built would make for a busier downtown and more revenue for the conference centre and of course tourism dollars in town overall, yes. But all of that is still just one peice of the larger, and ever morphing, puzzle that is Nanaimo’s real estate market. I am sharing this mainly to get the word out about the tax incentive because I would really like to see this hotel built. I would like to see more density and activity downtown and this is one way in which I can encourage that.

And here is the article in question:

Ryan Coffey

 After struggling to entice developers, city considers incentive plan that includes 10-year exemption

City officials are proposing new tax break incentives to spur construction of a conference centre hotel.

Nanaimo has been struggling to entice developers to build a hotel downtown, adjacent to the Vancouver Island Conference Centre. The $75 million facility is losing about $1 million a year largely because staff can’t book larger events.

With no bids to build the hotel and a growing need to lodge guests, the city is considering a new incentive package, beginning with a 10-year municipal tax exemption.

City officials are confident tax breaks will renew interest in the VICC hotel and improve Nanaimo’s stock of quality hotel rooms, laying the groundwork for larger conferences and tourism.

The previous incentive package to build twin condos at Maffeo Sutton Park was pulled by council earlier this year.

“One of the first things hotel developers want to know is what financial incentives we’re prepared to offer,” said Mayor John Ruttan.

“After looking somewhat unsuccessfully for three years, this is something we need to look at.”

Nanaimo has been unsuccessful in finding a developer to create the dream hotel, largely because it’s expected to be a break-even operation in the short term. There are not enough tourists coming to the city to inspire investors to put up the construction costs, said city manager Al Kenning.

The hotel is supposed to go hand-in-hand with the conference centre, a facility that has been handicapped in booking large events because of the lack of hotel rooms downtown Nanaimo.

The VICC has the potential to house over 1000 guests, but finds booking more than 500 challenging. Guests would have to look outside of Nanaimo to find accommodation.

The 10-year exemption is a key issue for council to consider, Kenning said. City staff believes it will lower costs enough to make investing in the hotel more viable.

There has already been several developers interested, according to Kenning.

The tax incentive program is geared at the VICC hotel, but will apply to any development or re-development in Nanaimo. The city wants to boost the total inventory of quality rooms it has to offer tourists.

According to Ruttan there are only about 400 rooms within a kilometre of the downtown core.

Susan Cudahy, chief executive officer for Nanaimo Economic Development Corporation, calls the proposal responsible and innovative. Quality hotel rooms are needed if Nanaimo is going to market itself as a tourist destination.

“This is the right step forward,” she said.

The reason this article strikes a chord with me is because I, like so many others, have been fascinated by watching the US market go through its dramatic downturn these past few years. Watching it play out and seeing who’s left at the end and why is this Realtor’s equivalent to how some biologists watch the struggle for survival during a major extinction and seeing what sorts of evolutionary traits end up making the difference before being passed on to future generations.

You wouldn’t know this from watching the news, but although we too have been affected in all of this we have fared very well compared to the US and so many other economies the world over. Our own lesser downturn in property values which was followed by a recovery and has since been waffling between getting warmer or cooler depending on which data you’re looking at, is still showing its own changes in terms of what sorts of new homes are available.

There is still a fair bit of inventory left over from the end of the boom in Nanaimo. It takes quite a long time to get the ball rolling from buying some property, getting zoning and permits and etc. in place let alone actually building it and then selling it. Then, there is this perception among the public that they will have to now pay HST on top of the purchase price. (Even though the full 12% is only applied to the balance over 425k, below that things are as they were before.) So, these perfectly fine places have been sitting there for a couple of years now, especially condos, and they keep getting cheaper. Some of them are amazing deals.

The market is far from dead though. I’ve had a pretty good year and the stats for the Nanaimo area suggest that I am not alone. For example, last year in October only 75 single family units were sold but this October 98 were sold.  People are spending a bit more too. Similar figures have been showing up on the stats since the summer. (Actually, maybe the spring, but I was simply too busy selling real estate to think about any of this at the time.)

But yes, here too I would say that the new places that are being built are a little less lavish than those from a few years ago. Cheaper locations are more popular too. The area south of Harewood, around 9th and 10th, is being populated with lots of inexpensive homes on inexpensive land.

Anyway, here is the article that inspired the above thoughts:

Wall Street Journal Article: Blueprint for a New American Home

Ryan Coffey

However, most people who visit this blog are here because they want info on buying or selling their home. If that’s you, there’s lots more on this blog but the best way to start is by joining the mailing list by entering your email address in the box on the right.  You’ll get a seven part series of articles sent your way that will give you all the info you need minus what is specific to your own situation. That’s where I come in.

Ryan Coffey

Commercial developers take advantage of market

Owners of Port Place Shopping Centre have nearly completed the first phase of a massive redevelopment, which could take at least 10 years to fully complete. The project remains the largest development in Nanaimo currently under construction and will go a long way in the ongoing revitalization of the downtown. It is one of many mixed-use developments in the city.

Most of the larger developments are commercial or a mix of commercial and residential, but despite this busy time for such property developers, there is an overall decrease in the number of building permits compared to this time last year, according to city staff, who expected to see a rise in applications this year. Construction cost totals exceeded 2010 figures, reaching $32 million as of the end of July, up from $24 million last year. First Capital Realty hopes to complete the initial phase of its Port Place overhaul in the next few months “It’s a bit of an act of faith on our part. All we did was buy a shopping centre that was functionally impaired and we’re investing money on the basis that Nanaimo will have growth in the coming years,” said Ralph Huizinga, the company’s vicepresident of acquisitions and development. “You have to believe in the future of Nanaimo to do this sort of thing.”

A large portion redevelopment has already been completed. When finished the estimated $20-million project will create a pedestrian-friendly building with widened sidewalks, exterior and interior shopping, public open spaces and a bike path around the entire property.

Overall plans include constructing a new street through the property connecting both Terminal Avenue and Front Street. The north portion of the mall will be turned inside out with small boutique shops lining the sidewalk. Across what has so far been dubbed High Street will be at least two floors of office space with plans to build two or three levels of residential units on top.

More residential units are planned in a couple other phases. Within five years, owners First Capital want to have mid-rise units on the north side of High Street, closer to Cameron Island.

Within 10 years, a 26-storey condo tower could be taking shape at the south-east corner of the property.

Workers have already completed most of the work for the portion of the mall that will remain indoors, including work done to the exterior.

Also, The TD Bank building at the corner of Nicol and Esplanade streets will be finished soon, giving an updated look to this aging and busy intersection.

Demolition of the north portion of the mall is nearly done as well and the company expects to complete High Street in two months.

Commercial developer RW Bob Wall has been busy during the recent residential construction slow down.

Bob Wall’s company has two significant projects in the construction phase.

One development at 1250 Stewart Ave. will have 21 condo units and will provide several amenities.

The resort-style building could be selling by March if targets are met, Wall explained.

He also has a mixed-use residential and commercial space being built on Metral Drive. The offices will be geared toward medical professionals, including physiotherapy and dentistry. Condo units will be constructed above.

The market is “solid” for commercial work, according to Wall. Developers want to take advantage of available labour and low interest rates.

“Businessmen use a different criteria (than homeowners),” he said. “They buy when interest rates are down, labour is available and material costs are reasonable. The housing market is such a big part of the construction industry, they drive the cost and availability.”

The largest residential development under construction is the 121-unit apartment building on Terminal Avenue.

This project will give a muchneeded boost to Nanaimo’s stagnant rental stock.

The five-storey development stretches one hectare, over three separate properties, at the corner of Cypress Street and Terminal and could be built within the next year. Converting the empty lots will increase density in the area that provides quick access to city transit, as well as the E&N trail. A new pedestrian crossing at the Cypress and Terminal intersection will also provide easy connection between the two neighbourhoods that flank terminal, while slowing traffic on the main thoroughfare.

The majority of the suites (54) will be one-bedroom units, but the building will also include 43 one-bedroom-and-den units, 13 two-bedroom units and eight bachelor units.

Like many of the commercial developments in the city, the owner of Terminal Heights Apartments Ltd. wanted to take advantage of available construction contractors and low interest rates.

More rental stock is on the way. One project is designed specifically for university students.

Vancouver developer Great West Developments began preliminary work on a new off-campus affordable, student housing project on Wakesiah Avenue. The 37unit development promises quality housing at affordable rates.

If you’re not sure if the changes mentioned below apply to your location, check out the city map or better yet, give them a call at the contact info provided in the .pdf file below.

MAY Media Release 2011 Open House

Ryan Coffey

Here are some regional stats if you’re not convinced:
http://www.vireb.com/assets/images/pdf/2010_annual_sales_summary.pdf

National average sale price according the Canadian Real Estate Association: Just shy of $350,000.

So, nationally, our prices are bang on national average. On the Island, (not including Victoria) we’re about average if a little higher than that. If we do include Victoria it skews things quite a bit because their average sale price is basically our price plus 50%. (They’re currently at $574,750 as their average.) Then there’s Vancouver which last I checked was double our average sale price. They changed how they measure things last year though so now it’s like comparing apples to Volvos. I suspect they did it to make their prices seem less expensive. Regardless, when I look at listings there and compare them to the most similar thing here it’s about double.

So, how are people able to pay for their homes here? Well, like I implied earlier, people aren’t moving here for the money so much as they are for the lifestyle. Retirees are a big part of the market on the island because of our mild winters and pretty location. They bring their money with them. So are younger people from well to do families in other parts of the world and/or people who have made money in other parts of the world. Lots of people these days have jobs that allow them to telecommute via internet as well. These groups of people in addition to local professionals like Doctors and successful business owners etc. are the ones who own the big pretty homes. A few people in the right position at the university do pretty well too. You don’t have to work in my industry to see this pattern though. Just go for a drive around town and ask yourself which local employers are paying for all these nice places.

The mid range (usually homes between 275k and 375k) are mostly young professionals, people who are renting out a suite for the mortgage helper, and regular people who have worked hard and saved for a long time. Lots of these homes out there and lots of people in this demographic.

Of course, you could get a deeper look from going through the most recent census data and comparing it to the latest real estate association data but I trust my own life/work experience more than what I can learn from that as it is much more detailed, up to date and well… real.

Looking at stats won’t tell you the following for example: You can buy a modest but comfortable condo or townhome in Nanaimo for a total of about $1,100-1,200/mo right now. That’s including taxes, strata fee and mortgage. Such places are abundant as they are the bread and butter of the condo market here. Usually two beds but sometimes three. There are cheaper places too, but in my eyes this is what your average first time buyer is comfortable living in when considering a condo.

Ryan Coffey

So here is the answer I gave:

You’ll see this sort of conversation in many spots throughout the forum. There is the odd street here and there that I wouldn’t want to raise my kids on since there are so many other choices available but the only area I strongly steer homeowners away from is the Haliburton/Nicol area. “Bad” and “good” are relative terms and everyone has a different idea of what qualifies for what. In my eyes the area mentioned above is comparable to living off of Commercial Drive in Vancouver in terms of how safe one feels there. Actually, it’s probably better than that since there are so much fewer people. If that’s the worst part of town, it’s saying a lot if you ask me.

I guarantee that someone will use the term “Scarewood” to describe Harewood either somewhere on this forum or in a conversation with you. It is my understanding that there was some truth to this 15 or 20 years ago but times are a changin’. I was actually living in Harewood myself for three years during that era and the worst thing I remember to me or those directly around me is that a friend on mine had his stereo stolen. Of course, worse things did, can and do happen there but also in other parts of town. Even in the fancy neighbourhoods. Harewood is actually the most likely location for my next home due to affordability and future prospects.

As an aside, if I was only interested in future prospects for investment in a rent out and hold onto situation, I would be likely to consider both of these areas first but then also consider the rest of Nanaimo. Good deals can be found in any neighbourhood. The combination of what we need and can afford are bigger factors in the eventual purchase than what our ideal home is, unless the buyer is rich and not many are.

That’s about it for the big picture. Infinite details can always be mentioned though.
Nanaimo is going through a stage of municipal puberty (yes, I’m using this term humourously) at the moment in that it is changing from small town to little city, but it is still essentially a small town. I can’t spend more than three or four hours walking around downtown without seeing at least one person I know.

To go beyond this though, I would need to know more about the individual asking the question. Someone who has lived in countries other than Canada will be less concerned  about what they find here than someone who has lived in Vancouver, and someone who has lived in Vancouver will be less concerned than someone who has lived most anywhere on Vancouver Island. It’s all relative.

Ryan

As I wrote in an earlier post, the City of Nanaimo is encouraging more density and one result of that is they are allowing secondary suites in homes. This is providing certain safety guidelines are followed of course.  But it’s not limited to just have a suite in the basement. There are these detached suites (often referred to as ‘carriage houses’) that the city is permitting these days as well. In short, if your house is a corner lot, over 1,000 square metres or has a lane that accesses to the back of the property, then you can built a carriage house suite. Any one of these three criteria is enough.

Click below to open the .pdf file that is issued by the city on this matter.

SecondarySuitesAccessoryBldgsHandout

Ryan Coffey

Before I get to the hows and whys of it, I need to fill you in on what property “ownership” really is. It’s a bundle of rights associated with a given property. Ultimately, all land actually belongs to the Queen. (Weird eh? Makes you wonder what year it is.  I think of this as being much like how we’re supposedly governed by her too.) In practice, this means that the land is yours to do with as you please within certain limitations. You likely know about zoning restrictions, building schemes, building permits and of course the requirement of paying taxes. So to a certain degree you already know that it’s not totally yours in the strictest sense of the word.

On the title search (the government issue document which shows who has what rights to the property) you will see the name of the registered owner and then things like who their mortgage is with (because the bank owns the unpaid for parts), rights of way and potentially a myriad of other things. Usually the “charges” as we call them, don’t amount to much in the real world but sometimes they do and getting help on interpreting them is one thing you need professionals for.

The one that is so often there but is hard to make sense of for many people is this E&N Railway charge.  The wording will vary but there is generally a mention of how the Esquimalt and Nanaimo Railway company has undersurface rights and/or some other rights to your land. Keep in mind, that even without this charge you would be unlikely to have the mineral rights.  According to this governement website, “Although landowners hold title to property, it should be understood that their Certificate of Title rarely includes what lies beneath the surface.  In British Columbia as in the other Canadian provinces, private surface does not include mineral rights. ”

So who/what is the E&N Railway?

Well, it’s a part of our national history. The E&N railway refers to the railway lines along the east coast of Vancouver Island and takes up almost twenty percent of the land and includes mineral rights to said area. According to The Encyclopedia of British Columbia, it was completed in in 1886 “when Prime Minister Sir John A. MacDonald, on his only visit to BC, drove the last spike at Cliffside near Shawnigan Lake. It was was the partial fulfillment of a promise by MacDonald that Esquimalt would be the terminus of the transcontinental railway.” . The railway was soon incorporated and over the years ownership of its rights has been passed from one company/entity to another.

If you’re still reading, you’re probably itching with the thought of “Ok, but are they going to take anything from my land?” Well, as far as I know, it is possible but it’s also pretty darn unlikely.

For further information, contact your Notary or Lawyer.

Ryan Coffey

If you live in an area that is outside city limits, but still think of it as “Nanaimo” (ex. Cedar, Extension) you are in the Regional District of Nanaimo which is a different municipal entity.

For more information you can contact the City of Nanaimo directly at the number shown.

Ryan Coffey